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BANC ONE ABS CORPORATION,
as Depositor,
BANK ONE, N.A.,
as Servicer,
and
________________________,
as Trustee
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POOLING AND SERVICING AGREEMENT
Dated as of ____ __, 1998
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Revolving Home Equity Loan Asset-Backed Certificates
Series 199_-_
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TABLE OF CONTENTS
Page
ARTICLE I Definition...................................................1
Section 1.01. Definitions............................................1
Section 1.02. Interest Calculations.................................17
Section 2.01. Conveyance of Mortgage Loans; Retention of
Obligation to Fund Advances Under Credit
Line Agreements.......................................18
Section 2.03. Representations and Warranties Regarding
the Servicer..........................................24
Section 2.04. Representations and Warranties of the
Seller Regarding the Mortgage Loans; Retransfer
of Certain Mortgage Loans.............................25
Section 2.05. Covenants of the Depositor............................30
Section 2.06. Retransfers of Mortgage Loans at
Election of Transferor................................31
Section 2.07. Execution and Authentication of Certificates..........32
Section 2.09. Representations and Warranties of the Depositor.......33
ARTICLE III Administration and Servicing of Mortgage Loans..............34
Section 3.01. The Servicer..........................................34
Section 3.02. Collection of Certain Mortgage Loan Payments..........35
Section 3.03. Withdrawals from the Collection Account...............37
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses...................................37
Section 3.05. Assumption and Modification Agreements................38
Section 3.06. Realization Upon Defaulted Mortgage Loans.............38
Section 3.07. Trustee to Cooperate..................................39
Section 3.08. Servicing Compensation; Payment of Certain
Expenses by Servicer..................................40
Section 3.09. Annual Statement as to Compliance.....................40
Section 3.10. Annual Servicing Report...............................40
Section 3.11. RESERVED..............................................41
Section 3.12. Access to Certain Documentation and
Information Regarding the Mortgage Loans..............41
Section 3.13. Maintenance of Certain Servicing Insurance Policies...41
Section 3.14. Reports to the Securities and Exchange Commission.....41
Section 3.15. Tax Returns...........................................41
Section 3.16. Information Required by the Internal
Revenue Service Generally and Reports of
Foreclosures and Abandonments of Mortgaged Property...42
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ARTICLE IV Servicing Certificate.......................................42
Section 4.01. Servicing Certificate.................................42
Section 4.02. Claims upon the Policy; Policy Payments Account.......45
Section 4.03. Spread Account........................................46
Section 4.04. Effect of Payments by the Credit
Enhancer; Subrogation.................................47
ARTICLE V Payments and Statements to Certificateholders;
Rights of Certificateholders................................48
Section 5.01. Distributions.........................................48
Section 6.01. The Certificates......................................52
Section 6.02. Registration of Transfer and Exchange of
Investor Certificates; Appointment of
Registrar.............................................52
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.....54
Section 6.04. Persons Deemed Owners.................................54
Section 6.05. Restrictions on Transfer of Transferor Interest.......55
Section 6.06. Appointment of Paying Agent...........................56
Section 6.07. Acceptance of Obligations.............................57
ARTICLE VII The Servicer, the Seller and the Depositor..................58
Section 7.01. Liability of the Seller, the Servicer
and the Depositor.....................................58
Section 7.02. Merger or Consolidation of, or
Assumption of the Obligations of, the
Servicer or the Depositor; Assignment of
Servicing to an Affiliate.............................58
Section 7.03. Limitation on Liability of the Servicer and Others....58
Section 7.04. Servicer Not to Resign................................59
Section 7.05. Delegation of Duties..................................59
Section 7.06. Indemnification of the Trust by the Servicer..........59
Section 7.07. Indemnification of the Trust by the Transferor........60
Section 7.08. Limitation on Liability of the Transferor.............60
ARTICLE VIII Servicing Termination.......................................61
Section 8.01. Events of Servicing Termination.......................61
Section 8.02. Trustee to Act; Appointment of Successor..............62
Section 8.03. Notification to Certificateholders....................63
ARTICLE IX The Trustee.................................................64
Section 9.01. Duties of Trustee.....................................64
Section 9.02. Certain Matters Affecting the Trustee.................65
Section 9.03. Trustee Not Liable for Certificates or
Mortgage Loans........................................66
Section 9.04. Trustee May Own Certificates..........................67
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Section 9.05. Servicer to Pay Trustee's Fees and Expenses;
Servicer to Indemnify.................................67
Section 9.06. Eligibility Requirements for Trustee..................67
Section 9.07. Resignation or Removal of Trustee.....................68
Section 9.08. Successor Trustee.....................................69
Section 9.09. Merger or Consolidation of Trustee....................69
Section 9.10. Appointment of Co-Trustee or Separate Trustee.........69
Section 9.11. Limitation of Liability...............................71
Section 9.12. Trustee May Enforce Claims Without
Possession of Certificates............................71
Section 9.13. Suits for Enforcement.................................71
ARTICLE X Termination.................................................72
Section 10.01. Termination...........................................72
ARTICLE XI Rapid Amortization Event....................................75
Section 11.01. Rapid Amortization Events.............................75
Section 11.02. Additional Rights Upon the Occurrence
of Certain Events.....................................76
ARTICLE XII Miscellaneous Provisions....................................78
Section 12.01. Amendment.............................................78
Section 12.02. Recordation of Agreement..............................79
Section 12.03. Limitation on Rights of Certificateholders............80
Section 12.04. Governing Law.........................................80
Section 12.05. Notices...............................................81
Section 12.06. Severability of Provisions............................81
Section 12.07. Assignment............................................81
Section 12.08. Certificates Nonassessable and Fully Paid.............81
Section 12.09. Third-Party Beneficiaries.............................81
Section 12.10. Counterparts..........................................82
Section 12.11. Effect of Headings and Table of Contents..............82
Section 12.12. Insurance Agreement...................................82
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This Pooling and Servicing Agreement, dated as of _______ __, 199_, among Banc
One ABS Corporation, as Depositor (the "Depositor"), Bank One, N.A., as Servicer
(the "Servicer"), and _____________________, as Trustee (the "Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
Definition
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
Accelerated Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, required to reduce the Investor
Certificate Principal Balance (after giving effect to the distribution of all
other amounts actually distributed on the Investor Certificates on such
Distribution Date) so that the Invested Amount (immediately following such
Distribution Date) exceeds the Investor Certificate Principal Balance (as so
reduced) by the Required Overcollateralization Amount.
Additional Balance: As to any Mortgage Loan and day, the aggregate amount
of all Draws conveyed to the Trust pursuant to Section 2.01.
Adjustment Date: With respect to any Interest Period, the second LIBOR
Business Day preceding the first day of such Interest Period.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
Alternative Principal Payment: As to any Distribution Date, the amount
(but not less than zero) equal to Principal Collections for such Distribution
Date less the aggregate of Draws under the Credit Line Agreements during the
related Collection Period.
Asset Balance: As to any Mortgage Loan, other than a Liquidated Mortgage
Loan, and day, the related Cut-Off Date Asset Balance, plus (i) any Additional
Balance in respect of such Mortgage Loan, minus (ii) all collections credited as
principal against the Asset Balance of any
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such Mortgage Loan in accordance with the related Credit Line Agreement. For
purposes of this definition, a Liquidated Mortgage Loan shall be deemed to have
an Asset Balance equal to the Asset Balance of the related Mortgage Loan
immediately prior to the final recovery of related Liquidation Proceeds and an
Asset Balance of zero thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Trustee, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the Borough of
Manhattan, The City of New York, printed in the English language and customarily
published on each Business Day, whether or not published on Saturdays, Sundays
and holidays.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
Billing Cycle: With respect to any Mortgage Loan , the period from the
cycle date (5th, 10th, 15th, 20th and 25th) in the preceding month to the
applicable cycle date in the current month.
Book-Entry Certificate: Any Investor Certificate registered in the name of
the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the State of New York or Ohio are required or
authorized by law to be closed.
Certificate: An Investor Certificate.
Certificate Owner: The Person who is the beneficial owner of a Book-Entry
Certificate.
Certificate Register and Certificate Registrar: The register maintained
and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Investor Certificate registered in the name of the Transferor, or any Person
known to a Responsible Officer to be an Affiliate of either the Depositor or the
Transferor and (y) any Investor Certificate for which the Transferor, or any
Person known to a Responsible officer to be an Affiliate of either the
Transferor or the Depositor is the Certificate Owner shall be deemed not to be
outstanding (unless to the knowledge of a Responsible Officer (i) the Transferor
or the Depositor, or such Affiliate is acting as trustee or
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nominee for a Person who is not an Affiliate of the Transferor or the Depositor
and who makes the voting decision with respect to such Investor Certificate or
(ii) the Transferor or the Depositor, or such Affiliate is the Certificate Owner
of all the Investor Certificates) and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect any such consent, direction, waiver or
request has been obtained.
Closing Date: ____ __, 199_.
Code: The Internal Revenue Code of 1986, as the same may be amended from
time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Investor Certificateholders and the Credit
Enhancer pursuant to Section 3.02(b). The Collection Account shall be an
Eligible Account.
Collection Period: With respect to any Distribution Date (other than the
first Distribution Date) and any Mortgage Loan, the calendar month preceding
such Distribution Date. With respect to the first Distribution Date, the period
from the first day immediately following the Cut-Off Date through ______ __,
199_.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan as of any
date, the percentage equivalent of the fraction, the numerator of which is (a)
the sum of (i) the greater of the related Cut-Off Date Asset Balance or the
Credit Limit and (ii) any outstanding principal balance of any senior mortgage
loans as of the origination of such Mortgage Loan and the denominator of which
is (b) the value based on a valuation of the related Mortgaged Property.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate business shall be administered, which office
on the Closing Date is located at _________________________,
Attention:___________________.
Credit Enhancement Draw Amount: As to any Distribution Date, an amount
equal to the sum of (x) the amount by which the amount to be distributed to
Investor Certificateholders pursuant to Section 5.01(a)(iii) exceeds the sum of
(i) the amount of Investor Interest Collections on deposit in the Collection
Account on the Business Day preceding such Distribution Date that is available
to be applied therefor and (ii) any amount transferred from the Spread Account
to the Collection Account pursuant to Section 4.03, (y) the Guaranteed Principal
Distribution Amount and (z) any Preference Claim for such Distribution Date.
Credit Enhancer:_______________, a New York monoline stock insurance
company, any successor thereto or any replacement credit enhancer substituted
pursuant to Section 4.03.
Credit Enhancer Default: The failure by the Credit Enhancer to make a
payment required under the Policy in accordance with the terms thereof.
Credit Limit: As to any Mortgage Loan, the maximum Asset Balance permitted
under the terms of the related Credit Line Agreement.
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Credit Limit Utilization Rate: As to any Mortgage Loan, the percentage
equivalent of a fraction the numerator of which is the Cut-Off Date Asset
Balance for such Mortgage Loan and the denominator of which is the related
Credit Limit.
Credit Line Agreement: With respect to any Mortgage Loan, the related
credit line account agreement executed by the related Mortgagor and any
amendment or modification thereof.
Custodial Agreement: Any Custodial Agreement between any Custodian and the
Trustee, which is reasonably acceptable in form and substance to the Credit
Enhancer, relating to the custody of the Mortgage Loans and the Related
Documents.
Custodian: Any custodian appointed by the Trustee under a Custodial
Agreement to maintain all or a portion of the Mortgage Files pursuant to Section
2.01(b).
Cut-Off Date: The end of business on____ __, 199_.
Cut-Off Date Asset Balance: With respect to any Mortgage Loan, the unpaid
principal balance thereof as of the Cut-off Date.
Cut-Off Date Pool Balance: The Pool Balance calculated as of the Cut-Off
Date.
Cut-Off Date Weighted Average Gross Margin: The weighted average of the
Gross Margins of the Mortgage Loans as of the Cut-Off Date, weighted on the
basis of the Cut-Off Date Asset Balance.
Defective Mortgage Loan: A Mortgage Loan subject to retransfer pursuant to
Section 2.02 or 2.04.
Definitive Certificates: As defined in Section 6.02(c).
Delivery Event: As defined in Section 2.01.
Depositor: Banc One ABS Corporation, or its successor in interest.
Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is Cede & Co., as the registered Holder of Investor
Certificates evidencing $___________ in initial aggregate principal amount of
the Investor Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the UCC of the State of New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date, the fourth
Business Day prior to such Distribution Date.
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Distribution Date: The ________ day of each month, or if such day is not a
Business Day, then the next Business Day, beginning in the month immediately
following the month of the initial issuance of the Certificates.
Document Preparation Trigger: The rating of the Servicer's long-term
unsecured debt obligations is reduced below __ and __ by ________ and _________
respectively.
Draw: With respect to any Mortgage Loan, an additional borrowing by the
Mortgagor subsequent to the Cut-Off Date in accordance with the related Mortgage
Note.
Due Date: As to any Mortgage Loan, the day on which payments under such
Mortgage Loan are due.
Electronic Ledger: The electronic master record of home equity credit line
mortgage loans maintained by the Servicer [or the Seller, as appropriate].
Eligible Account: An account that is either (i) maintained with a
depository institution whose (a) short-term debt obligations throughout the time
of any deposit therein are rated in the highest short-term debt rating category
by _________ and (b) short-term and long-term obligations throughout the time of
any deposit therein are rated at least ___ and ___, respectively by _______,
(ii) an account or accounts maintained with a depository institution with a
minimum long term unsecured debt rating of _____ by ________ provided that the
deposits in such account or accounts are fully insured by either the BIF or the
SAIF, or (iii) a segregated trust account maintained (A) with the corporate
trust department of the Trustee in its fiduciary capacity, or (B) with an
institution with capital and surplus of not less than $50,000,000 and with a
minimum long-term unsecured debt rating of at least ____ by _______ and _____ by
___________ or (iv) an account otherwise acceptable to each Rating Agency and
the Credit Enhancer, as evidenced at closing by delivery of a rating letter by
each Rating Agency and thereafter by delivery of a letter from each Rating
Agency and the Credit Enhancer to the Trustee, within 30 days of receipt of
notice of such deposit, to reduce or withdraw its then-current rating of the
Certificates without regard to the Policy.
Eligible Affiliate Servicer: Any Affiliate of Bank One, N.A. that has been
assigned a rating that is at least equal to _____ and ____ by _________ and
___________, respectively.
Eligible Investments: One or more of the following (excluding any callable
investments purchased at a premium):
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided that such obligations are
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition thereof,
provided that the short-term unsecured debt obligations of the party
agreeing to repurchase such obligations are at the time rated by each
Rating Agency in its highest short-term rating category (which is A-l+ for
Standard & Poor's and P-1 for Moody's);
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(iii) certificates of deposit, time deposits and bankers'
acceptances (which, if Moody's is a Rating Agency shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than 365
days) of any U.S. depository institution or trust company incorporated
under the laws of the United States or any state thereof and subject to
supervision and examination by federal and/or state banking authorities,
provided that the unsecured short-term debt obligations of such depository
institution or trust company at the date of acquisition thereof have been
rated by each of Moody's and Standard & Poor's in its highest unsecured
short-term debt rating category;
(iv) commercial paper (having original maturities of not more than
270 days) of any corporation incorporated under the laws of the United
States or any state thereof (including Bank One, N.A. or any related
Affiliate) which on the date of acquisition has been rated by Standard &
Poor's and Moody's in their highest short-term debt rating categories;
(v) short term investment funds ("STIFS") sponsored by any trust
company or national banking association incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated by Standard & Poor's and Moody's in their respective highest
applicable rating category; and
(vi) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time such
interests are held in such fund has a rating of Aaa by Moody's and either
AAAm or AAAm-G by Standard & Poor's or such lower rating as will not
result in the qualification, downgrading or withdrawal of the then-current
rating assigned to the Certificates by each Rating Agency without regard
to the Policy;
(vii) other obligations or securities that are acceptable to each
Rating Agency and the Credit Enhancer as an Eligible Investment hereunder
and will not result in a reduction in the then current rating of the
Certificates without regard to the Policy, as evidenced by a letter to
such effect from such Rating Agency and the Credit Enhancer and with
respect to which the Servicer has received confirmation that, for tax
purposes, the investment complies with the last clause of this definition;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted [by the
Seller] for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Asset Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective
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Mortgage Loan, an aggregate Asset Balance), that is approximately equal to the
Transfer Deficiency, if any, relating to such Defective Mortgage Loan; (ii) have
a Loan Rate not less than the Loan Rate of the Defective Mortgage Loan and not
more than l% in excess of the Loan Rate of such Defective Mortgage Loan; (iii)
have a Loan Rate based on the same Index with adjustments to such Loan Rate made
on the same Interest Rate Adjustment Date as that of the Defective Mortgage
Loan; (iv) have a Gross Margin that is not less than the Gross Margin of the
Defective Mortgage Loan and not more than l% higher than the Gross Margin for
the Defective Mortgage Loan; (v) have a Mortgage of the same or higher level of
priority as the Mortgage relating to the Defective Mortgage Loan at the time
such Mortgage was transferred to the Trust; (vi) have a remaining term to
maturity not more than six months earlier and not more than sixty months later
than the remaining term to maturity of the Defective Mortgage Loan; (vii) comply
with each representation and warranty set forth in Section 2.04 (deemed to be
made as of the date of substitution); and (viii) have an original Combined
Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan. More
than one Eligible Substitute Mortgage Loan may be substituted for a Defective
Mortgage Loan if such Eligible Substitute Mortgage Loans meet the foregoing
attributes in the aggregate and such substitution is approved in writing in
advance by the Credit Enhancer.
Endorsement: As defined in the Policy.
ERISA: Employee Retirement Income Security Act of 1974, as amended.
Event of Servicing Termination: As defined in Section 8.01.
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
Fiscal Agent: As defined in the Policy.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Asset Balance (plus accrued and unpaid interest thereon
at the applicable Loan Rate from the date interest was last paid through the
date of receipt of the final Liquidation Proceeds) of such Liquidated Mortgage
Loan immediately prior to the final recovery of its Liquidation Proceeds.
Gross Margin: As to any Mortgage Loan, the percentage set forth as the
"Gross Margin" for such Mortgage Loan on Exhibit C hereto.
Guaranteed Distribution: With respect to any Distribution Date, the sum of
the (i) the Guaranteed Principal Distribution Amount and (ii) the amount to be
distributed to Certificateholders pursuant to Section 5.01(a)(iii) for such
Distribution Date.
Guaranteed Principal Distribution Amount: With respect to any Distribution
Date, (i) on any such Distribution Date, other than the Distribution Date in
____________, the amount, if any, required to reduce the Investor Certificate
Principal Balance (after giving effect to the distributions of Interest
Collections and Principal Collections that are allocable to principal on the
Investor Certificates on such Distribution Date) to the Invested Amount
immediately following such Distribution Date or (ii) on the Distribution Date in
_____________ the amount by which the outstanding Investor Certificate
Principal Balance (after giving effect to Interest
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Collections allocable and distributable to principal on the Investor
Certificates on such Distribution Date) exceeds the sum of the amounts on
deposit in the Collection Account available to be distributed to the Investor
Certificateholders pursuant to Section 5.01(b) hereof.
Index: With respect to each Interest Rate Adjustment Date for a Mortgage
Loan, the average Weekly Bank Prime Loan Rate as published by the Board of
Governors of the Federal Reserve System in Statistical Release H.15 for the week
which includes the 15th day of the month.
Insolvency Event: As defined in Section 11.02.
Insurance Agreement: The insurance and indemnity agreement dated as of
_____ __, 199_ among the Depositor, [the Seller,] the Servicer, the Trustee and
the Credit Enhancer, including any amendments and supplements thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the Credit
Enhancer) pursuant to any insurance policy covering a Mortgage Loan, or amounts
required to be paid by the Servicer pursuant to the last sentence of Section
3.04, net of any component thereof (i) covering any expenses incurred by or on
behalf of the Servicer in connection with obtaining such proceeds, (ii) that is
applied to the restoration or repair of the related Mortgaged Property, (iii)
released to the Mortgagor in accordance with the Servicer's normal servicing
procedures or (iv) required to be paid to any holder of a mortgage senior to
such Mortgage Loan.
Interest Collections: As to any Distribution Date, the sum of all payments
by or on behalf of Mortgagors and any other amounts constituting interest
(including without limitation such portion of Insurance Proceeds and Net
Liquidation Proceeds as is allocable to interest on the applicable Mortgage
Loan) collected by the Servicer under the Mortgage Loans (excluding any fees
(including annual fees) or late charges or similar administrative fees paid by
Mortgagors) plus any gains and investment earnings from amounts on deposit in
the Collection Account during the related Collection Period minus the Servicing
Fee payable to the Servicer with respect to the related Collection Period. The
terms of the related Credit Line Agreement shall determine the portion of each
payment in respect of such Mortgage Loan that constitutes principal or interest.
Interest Period: With respect to any Distribution Date other than the
first Distribution Date, the period beginning on the preceding Distribution Date
and ending on the day preceding such Distribution Date, and in the case of the
first Distribution Date, the period beginning on the Closing Date and ending on
the day preceding the first Distribution Date.
Interest Rate Adjustment Date: With respect to each Mortgage Loan, any
date on which the Loan Rate is adjusted in accordance with the related Credit
Line Agreement.
Invested Amount: With respect to any Distribution Date, an amount equal to
the Original Invested Amount minus (i) the amount of Principal Collections
previously distributed to Investor Certificateholders and minus (ii) the
Investor Loss Amounts for prior Distribution Dates.
Investor Certificate: Any certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit A hereto.
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Investor Certificate Distribution Amount: As to any Distribution Date, the
sum of all amounts to be distributed to the Holders of Investor Certificates
pursuant to Article V and Article XI hereof.
Investor Certificate Interest: With respect to any Distribution Date,
interest for the related Interest Period at the applicable Investor Certificate
Rate on the Investor Certificate Principal Balance as of the first day of such
Interest Period (after giving effect to the distributions made on the first day
of such Interest Period).
Investor Certificate Principal Balance: With respect to any Distribution
Date, (a) the Original Investor Certificate Principal Balance less (b) the
aggregate of amounts actually distributed as principal on the Investor
Certificates.
Investor Certificate Rate: With respect to the first Interest Period,
______%, and for any subsequent Interest Period, the sum of (a) LIBOR as of the
second LIBOR Business Day prior to the first day of such Interest Period and (b)
____%; provided, however, that in no event shall the Investor Certificate Rate
with respect to any Interest Period exceed the Maximum Rate for such Interest
Period.
Investor Certificateholder: The Holder of an Investor Certificate.
Investor Floating Allocation Percentage: With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
Invested Amount at the close of business on the preceding Distribution Date (or
at the Closing Date in the case of the first Distribution Date) and the
denominator of which is the Pool Balance, calculated as of the beginning of the
related Collection Period.
Investor Fixed Allocation Percentage: __%.
Investor Interest Collections: As to any Distribution Date the product of
(i) the Interest Collections during the related Collection Period and (ii) the
Investor Floating Allocation Percentage for such Distribution Date.
Investor Loss Amount: With respect to any Distribution Date, an amount
equal to the product of (i) the Investor Floating Allocation Percentage for such
Distribution Date and (ii) the aggregate of the Liquidation Loss Amounts for
such Distribution Date.
Investor Loss Reduction Amount: With respect to any Distribution Date, the
portion, if any, of the Investor Loss Amount for such Distribution Date and all
prior Distribution Dates that has not been distributed to Investor
Certificateholders on such Distribution Date pursuant to Section 5.01(a)(iv) or
5.01(a)(v) or by way of the Credit Enhancement Draw Amount.
Investor Principal Collections: As to any Distribution Date, the Investor
Fixed Allocation Percentage of Principal Collections in respect of such
Distribution Date.
LIBOR: As to any date, the rate for one month United States dollar
deposits which appears on the Telerate Screen LIBOR Page 3750 as of 11:00 A.M.,
London time on such date. If such rate does not appear on such page (or such
other page as may replace that page on that
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service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Depositor after consultation with the Trustee), the rate will be the Reference
Bank Rate. If no such quotations can be obtained and no Reference Bank Rate is
available, LIBOR will be LIBOR applicable to the preceding Distribution Date.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the State of New York or in the City of
London, England are required or authorized by law to be closed.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided,
however, that any assignment pursuant to Section 7.02 hereof shall not be deemed
to constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of the
related Credit Line Agreement, as set forth on Exhibit C hereto.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan
in respect of which the Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Collection
Period, that all Liquidation Proceeds which it expects to recover with respect
to the disposition of such Mortgage Loan or the related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) which
are incurred by the Servicer in connection with the liquidation of any Mortgage
Loan and not recovered under any insurance policy, including, without
limitation, legal fees and expenses, any unreimbursed amount expended pursuant
to Section 3.06 (including, without limitation, amounts advanced to correct
defaults on any Mortgage Loan which is senior to such Mortgage Loan and amounts
advanced to keep current or pay off a Mortgage Loan that is senior to such
Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed expenditures with respect to real estate property taxes, water or
sewer taxes, condominium association dues, property restoration or preservation
or insurance against casualty, loss or damage.
Liquidation Loss Amount: With respect to any Distribution Date and any
Mortgage Loan that becomes a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered Asset Balance thereof at the end of such
Collection Period, after giving effect to the Net Liquidation Proceeds applied
in reduction of such Asset Balance.
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Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Policy) received in connection with the
liquidation of any Mortgage Loan or related REO, whether through trustee's sale,
foreclosure sale or otherwise.
Loan Rate: With respect to any Mortgage Loan and as of any day, the per
annum rate of interest applicable under the related Credit Line Agreement to the
calculation of interest for such day on the Asset Balance of such Mortgage Loan.
Loan Rate Cap: With respect to each Mortgage Loan, the lesser of (i) the
Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling, if any.
Managed Amortization Period: The period from the Closing Date to and
including the Rapid Amortization Commencement Date.
Maximum Principal Payment: With respect to any Distribution Date, the
product of the Investor Fixed Allocation Percentage and the Principal
Collections for such Distribution Date.
Maximum Rate: As to any Interest Period, the Weighted Average Net Loan
Rate for the Collection Period during which such Interest Period begins
(adjusted to an effective rate reflecting accrued interest calculated on the
basis of the actual number of days in the Collection Period commencing in the
month in which such Interest Period commences and a year assumed to consist of
360 days).
Minimum Monthly Payment: With respect to any Mortgage Loan and any month,
the minimum amount required to be paid by the related Mortgagor in that month.
Minimum Transferor Interest: With respect to any date, an amount equal to
the lesser of (a) _% of the Pool Balance on such date and (b) the Transferor
Principal Balance as of the Closing Date.
[Moody's: Moody's Investors Service, Inc. or its successor in interest.]
Mortgage: The mortgage, deed of trust or other instrument creating a
first, second or third lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining to
a particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage
Loans included in the Trust on such date. The initial schedule of Mortgage Loans
as of the Cut-Off Date is the schedule set forth herein as Exhibit C, which
schedule sets forth as to each Mortgage Loan (i) the Cut-Off Date Asset Balance,
(ii) the Credit Limit, (iii) the Gross Margin, (iv) the Lifetime Rate Cap, (v)
the account number, (vi) the current Loan Rate, (vii) the date of origination,
(viii) the original term to maturity, (ix) State in which the Mortgaged Property
is located; and (x) the originator. The Mortgage Loan Schedule will be deemed to
be amended from time to time to reflect Additional Balances.
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Mortgage Loans: The mortgage loans, including Additional Balances with
respect thereto, that are transferred and assigned to the Trustee pursuant to
Section 2.01, together with the Related Documents, exclusive of Mortgage Loans
that are retransferred to the Depositor, the Servicer [or the Seller] from time
to time pursuant to Section 2.02, 2.04, 2.06 or 3.01 as from time to time are
held as a part of the Trust. The mortgage loans originally so held are
identified in the Mortgage Loan Schedule delivered on the Closing Date. The
Mortgage Loans shall also include any Eligible Substitute Mortgage Loan
substituted by [the Seller] for a Defective Mortgage Loan pursuant to Sections
2.02 and 2.04.
Mortgage Note: With respect to a Mortgage Loan, the Credit Line Agreement
pursuant to which the related Mortgagor agrees to pay the indebtedness evidenced
thereby and secured by the related Mortgage.
Mortgaged Property: The underlying property, including any real property
and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Credit Line Agreement.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and as to any day, the
Loan Rate less the Servicing Fee Rate, the Premium Fee Rate and the Trustee Fee
Rate.
Officer's Certificate: A certificate signed by the President, an Executive
Vice President, a Senior Vice President, a Vice President, an Assistant Vice
President, the Treasurer, Assistant Treasurer, Controller or Assistant
Controller of the Depositor, the Servicer or the Transferor, as the case may be,
and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee, who may be in-house counsel for the Depositor, [the Seller,] the
Servicer or the Transferor (except that any opinion pursuant to Section 7.04 or
relating to taxation must be an opinion of independent outside counsel) and who,
in the case of opinions delivered to the Credit Enhancer and the Rating Agency,
is reasonably acceptable to it.
Original Invested Amount: $____________.
Original Investor Certificate Principal Balance: $___________.
Overcollateralization Amount: At the time of reference thereto, the
amount, if any, by which the Invested Amount exceeds the Investor Certificate
Principal Balance.
Paying Agent: Any paying agent appointed pursuant to Section 6.06.
Percentage Interest: As to any Investor Certificate, the percentage
obtained by dividing the principal denomination of such Investor Certificate by
the aggregate of the principal denominations of all Investor Certificates.
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Person: Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Policy: The financial guaranty insurance policy number , and all
endorsements thereto, dated as of the Closing Date, issued by the Credit
Enhancer to the Trustee for the benefit of the Investor Certificateholders.
Policy Payments Account: As defined in Section 4.02.
Pool Balance: With respect to any date, the aggregate of the Asset
Balances of all Mortgage Loans as of such date.
Pool Factor: With respect to any Distribution Date, the percentage,
carried to seven places, obtained by dividing the Investor Certificate Principal
Balance for such Distribution Date by the Original Investor Certificate
Principal Balance.
Preference Claim: As defined in Section 4.02.
Premium Fee Rate: As described in the Insurance Agreement.
Principal Collections: As to any Distribution Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
principal (including but not limited to any portion of Insurance Proceeds or Net
Liquidation Proceeds allocable to principal of the applicable Mortgage Loan, and
Transfer Deposit Amounts, but excluding Foreclosure Profits) collected by the
Servicer under the Mortgage Loans during the related Collection Period. The
terms of the related Credit Line Agreement shall determine the portion of each
payment in respect of a Mortgage Loan that constitutes principal or interest.
Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of the
Cut-off Date, between ________________, as Seller, and the Depositor, as
purchaser, with respect to the Mortgage Loans.
Rapid Amortization Commencement Date: The earlier of (i) the Distribution
Date in _______ and (ii) the Distribution Date next succeeding the Collection
Period in which a Rapid Amortization Event is deemed to occur pursuant to
Section 11.01.
Rapid Amortization Event: As defined in Section 11.01.
Rapid Amortization Period: The period following the Managed Amortization
Period until the termination of the Trust pursuant to Section 10.01.
Rating Agency: Any statistical credit rating agency, or its successor,
that rated the Investor Certificates at the request of the Depositor at the time
of the initial issuance of the Certificates. If such agency or a successor is no
longer in existence, "Rating Agency" shall be such statistical credit rating
agency, or other comparable Person, designated by the Depositor and the Credit
Enhancer, notice of which designation shall be given to the Trustee. References
herein to the highest short term unsecured rating category of a Rating Agency
shall mean ____ or
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better in the case of __________ and ____ or better in the case of ________ and
in the case of any other Rating Agency shall mean the ratings such other Rating
Agency deems equivalent to the foregoing ratings. References herein to the
highest long-term rating category of a Rating Agency shall mean "____" in the
case of __________ and "___" in the case of _____ and in the case of any other
Rating Agency, the rating such other Rating Agency deems equivalent to the
foregoing ratings.
Recalculated Weighted Average Gross Margin: The Cut-off Date Weighted
Average Gross Margin recalculated based upon the assumption that each Mortgage
Loan that has had a reduction to its Gross Margin pursuant to Section 3.01 had
such reduced Gross Margin as of the Cut-off Date.
Record Date: The last day preceding the related Distribution Date;
provided, however, that following the date on which the Definitive Certificates
are available pursuant to Section 6.02(c) the Record Date shall be the last day
of the calendar month preceding the month in which the related Distribution Date
occurs.
Reference Bank Rate: As to any Interest Period as follows: the arithmetic
mean (rounded upwards, if necessary, to the nearest one sixteenth of a percent)
of the offered rates for one month United States dollar deposits which are
offered by the Reference Banks as of 11:00 A.M., London time, on the second
LIBOR Business Day prior to the first day of such Interest Period to prime banks
in the London interbank market in amounts approximately equal to the Outstanding
Investor Certificate Principal Balance; provided that at least two such
Reference Banks provide such rate. If fewer than two offered rates appear, the
Reference Bank Rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Depositor after consultation
with the Trustee, as of 11:00 A.M., New York City time, on such date for loans
in U.S.. Dollars to leading European Banks for a period of one month in amounts
approximately equal to the outstanding Investor Certificate Principal Balance.
If no such quotations can be obtained, the Reference Bank Rate shall be the
Reference Bank Rate applicable to the preceding Interest Period.
Reference Banks: Three major banks that are engaged in the London
interbank market, selected by the Depositor after consultation with the Trustee.
Related Documents: As defined in Section 2.01.
REO: A Mortgaged Property that is acquired by the Trust in foreclosure or
by deed in lieu of foreclosure.
Required Overcollateralization Amount: As defined in the Insurance
Agreement.
Responsible Officer: When used with respect to the Trustee, any officer of
the Trustee with direct responsibility for the administration of this Agreement
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
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Revolving Period: With respect to each Mortgage Loan, the period specified
for such Mortgage Loan in the related Credit Line Agreement, during which the
Mortgagor is permitted to make Draws.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Scheduled Principal Collections Distribution Amount: With respect to any
Distribution Date during the Managed Amortization Period and the Investor
Certificates, an amount equal to the lesser of (i) the Maximum Principal Payment
and (ii) the Alternative Principal Payment. With respect to any Distribution
Date during a Rapid Amortization Period, the Maximum Principal Payment.
Seller: ________________________ and any successor thereto.
Servicer: Bank One, N.A., a national banking association and any successor
hereunder.
Servicing Certificate: A certificate completed and executed by a Servicing
Officer in accordance with Section 4.01.
Servicing Fee: With respect to any Distribution Date, the product of (i)
the Servicing Fee Rate divided by 12 and (ii) the aggregate Asset Balance of the
Mortgage Loans on the first day of the Collection Period preceding such
Distribution Date (or at the Cut-Off Date with respect to the first Distribution
Date).
Servicing Fee Rate: ____% per annum.
Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee (with a copy to the Credit Enhancer) by the Servicer on the Closing
Date, as such list may be amended from time to time.
Spread Account: The account created pursuant to Section 4.03 and
maintained pursuant to the Insurance Agreement.
Spread Account Requirement: As defined in the Insurance Agreement.
[Standard & Poor's: Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, or its successor in interest.]
Telerate Screen Page 3750: The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks).
Transfer Date: As defined in Section 2.06.
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Transfer Deficiency: As defined in Section 2.02.
Transfer Deposit Amount: As defined in Section 2.02.
Transfer Notice Date: As defined in Section 2.06.
Transferor: The Holder of the Transferor Interest.
Transferor Collections: As to any period, the sum of Transferor Interest
Collections and Transferor Principal Collections for such period.
Transferor Interest: The interest of the Transferor in the Trust issued by
the Trustee pursuant to Section 6.01.
Transferor Interest Collections: Interest Collections that are not
Investor Interest Collections. Transferor Principal Balance: As of any date of
determination, the amount equal to (i) the Pool Balance at the end of the day
next preceding such date of determination less (ii) the Invested Amount as of
the close of business on the preceding Distribution Date.
Transferor Principal Collections: On any Distribution Date, Principal
Collections received during the related Collection Period minus the amount of
such Principal Collections required to be distributed to Investor
Certificateholders pursuant to Section 5.01(b).
Trust: The trust created by this Agreement, the corpus of which consists
of the Mortgage Loans, such other assets as shall from time to time be
identified as deposited in the Collection Account in accordance with this
Agreement, property that secured a Mortgage Loan and that has become REO, the
interest of the Depositor in certain hazard insurance policies maintained by the
Mortgagors or the Servicer in respect of the Mortgage Loans, the Policy, the
Spread Account, an assignment of the Depositor's rights under the Purchase
Agreement and all proceeds of each of the foregoing.
Trustee: _____________________ or any successor Trustee appointed in
accordance with this Agreement that has accepted such appointment in accordance
with this Agreement.
Trustee Fee: A fee which is separately agreed to between the Servicer and
the Trustee.
Trustee Fee Rate: The per annum rate at which the Trustee Fee is
calculated.
UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
Unpaid Investor Certificate Interest Shortfall: With respect to any
Distribution Date, the aggregate amount, if any, of Investor Certificate
Interest that was accrued in respect of a prior Distribution Date and has not
been distributed to Investor Certificateholders.
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Valuation: With respect to any Mortgaged Property and valuation made prior
to the Closing Date, either (a) an appraisal (Uniform Residential Appraisal
Report or FHLMC 704/Single Page/Short Form/FNMA 2055) conducted by an
independent appraiser or (b) a valuation based upon any one of the following (in
order of priority): (i) HUD-1 Settlement Statement (if prepared within the
twelve months preceding the date of origination, (ii) tax assessment, (iii)
electronic valuation and (iv) any other valuation (e.g. based on comparable
sales, broker's opinion, drive-by appraisal and/or interior inspection. With
respect to any Mortgaged Property and valuation made on or after the Closing
Date, an appraisal conducted on a form approved by FNMA.
Weighted Average Net Loan Rate: As to any Collection Period other than the
first Collection Period, the average of the daily Net Loan Rate for each
Mortgage Loan for each day during the related Billing Cycle, weighted on the
basis of the daily average of the related Asset Balances outstanding for each
day in such Billing Cycle for each Mortgage Loan as determined by the Servicer
in accordance with the Servicer's normal servicing procedures and in the case of
the first Collection Period, the weighted average of the Net Loan Rates for each
Mortgage Loan as of the Cut-Off Date weighted on the basis of the Cut-Off Date
Asset Balance.
Section 1.02. Interest Calculations. All calculations of interest
hereunder that are made in respect of the Asset Balance of a Mortgage Loan shall
be made on a daily basis using a 365-day year. All calculations of interest on
the Investor Certificates shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest penny with one-half of one penny being rounded
down.
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ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements. (a) The Depositor, concurrently with
the execution and delivery of this Agreement, does hereby transfer, assign, set
over and otherwise convey to the Trust without recourse (subject to Sections
2.02 and 2.04) all of its right, title and interest in and to (i) each Mortgage
Loan, including its Asset Balance (including all Additional Balances) and all
collections in respect thereof received after the Cut-Off Date; (ii) property
that secured a Mortgage Loan that is acquired by foreclosure or deed in lieu of
foreclosure; (iii) the Depositor's rights under the Purchase Agreement; (iv) the
Depositor's rights under the hazard insurance policies, (v) the Spread Account
and (vi) all other assets included or to be included in the Trust for the
benefit of Certificateholders; provided, however, neither the Trustee nor the
Trust assumes the obligation under any Credit Line Agreement that provides for
the funding of future advances to the Mortgagor thereunder, and neither the
Trust nor the Trustee shall be obligated or permitted to fund any such future
advances. Additional Balances shall be part of the related Asset Balance and are
hereby transferred to the Trust on the Closing Date pursuant to this Section
2.01, and therefore part of the Trust property. In addition, on or prior to the
Closing Date, the Depositor shall cause the Credit Enhancer to deliver the
Policy to the Trustee for the benefit of the Investor Certificateholders. The
foregoing transfer, assignment and conveyance to the Trust shall be made to the
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfer, assignment and conveyance shall be construed accordingly.
The Depositor agrees to take or cause to be taken such actions and execute
such documents (including without limitation the filing of all necessary
continuation statements for the UCC-1 financing statements filed in the State of
New York (which shall have been filed within 90 days of the Closing Date)
describing the Cut-Off Date Asset Balances and Additional Balances and naming
the Depositor as debtor and the Trustee as secured party and any amendments to
UCC-1 financing statements required to reflect a change in the name or corporate
structure of the Depositor or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the Depositor (within 90
days of any event necessitating such filing) as are necessary to perfect and
protect the Certificateholders' and Credit Enhancer's interests in each Cut-Off
Date Asset Balance and Additional Balances and the proceeds thereof (other than
maintaining possession by the Trustee of the Mortgage Loans and the Mortgage
Files, which possession will, subject to the terms hereof, be maintained by the
Servicer as custodian and bailee of the Trustee).
(b) In connection with such transfer and assignment by the Depositor, the
Servicer acknowledges that it is holding as custodian and bailee for the Trustee
the following documents or instruments (the "Related Documents") with respect to
each Mortgage Loan:
(i) the original Mortgage Note;
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(ii) the original recorded Mortgage or, if, in connection with any
Mortgage Loan, the original recorded Mortgage with evidence of recording
thereon cannot be delivered on or prior to the Closing Date because of a
delay caused by the public recording office where such original Mortgage
has been delivered for recordation or because such original Mortgage has
been lost, the Seller, at the direction of the Depositor, shall deliver or
cause to be delivered to the Custodian, as agent for the Trustee, a true
and correct copy of such Mortgage, together with an officer's Certificate
of the Seller stating that such original Mortgage has been dispatched to
the appropriate public recording official or has been lost;
(iii) if applicable, the original intervening assignments, if any
("Intervening Assignments"), with evidence of recording thereon, showing a
complete chain of title to the Mortgage from the originator to the
Depositor or, if any such original Intervening Assignment has not been
returned from the applicable recording office or has been lost, a true and
correct copy thereof, together with an Officer's Certificate of the Seller
stating that such original Intervening Assignment has been dispatched to
the appropriate public recording official for recordation or has been
lost;
(iv) for each Mortgage Loan either a title insurance policy or a
title search or guaranty of title with respect to the related Mortgaged
Property to the extent in possession of the Seller or its Affiliates;
(v) the original of any guaranty executed in connection with the
Mortgage Note;
(vi) the original of each assumption, modification, consolidation or
substitution agreement, if any, relating to the Mortgage Loan; and
(vii) any security agreement, chattel mortgage or equivalent
instrument executed in connection with the Mortgage; and
(viii) within 90 days of a Document Preparation Trigger, the
original Mortgage Note, endorsed in blank and an original Assignment of
Mortgage endorsed in blank prepared in recordable form, in each case as
required by Section 2.01(b).
provided, however, that as to any Mortgage Loan, if (a) as evidenced by an
opinion of Counsel delivered to and in form and substance satisfactory to the
Trustee and the Credit Enhancer, (x) an optical image or other representation of
the related documents specified in clauses (i) through (viii) above are
enforceable in the relevant jurisdictions to the same extent as the original of
such document and (y) such optical image or other representation does not impair
the ability of an owner of such Mortgage Loan to transfer its interest in such
Mortgage Loan, and (b) the retention of such documents in such format will not
result in a reduction in the then current rating of the Investor Certificates,
without regard to the Policy, such optical image or other representation may be
held by the Servicer, as custodian for the Trustee or assignee in lieu of the
physical documents specified above.
[The Seller hereby confirms to the Trustee that it has caused the portions
of the Electronic Ledgers relating to the Mortgage Loans to be clearly and
unambiguously marked, and
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has made the appropriate entries in its general accounting records, to indicate
that such Mortgage Loans have been transferred to the Trust at the direction of
the Depositor.] The Servicer hereby confirms to the Trustee that it has clearly
and unambiguously made appropriate entries in its general accounting records
indicating that such Mortgage Loans constitute part of the Trust and are
serviced by it on behalf of the Trust in accordance with the terms hereof.
[The Seller and] Servicer agree not to notify the obligors on the Mortgage
Loans of the transfer of the Mortgage Loans to the Trust, unless required by the
terms of the Mortgage Loans or applicable law.
It is the express intent of the parties hereto that the conveyance of the
Mortgage Loans by the Depositor to the Trustee as provided in this Agreement be,
and be construed as, a sale of all of the Depositor's right, title and interest
in the Mortgage Loans by the Depositor to the Trustee. It is, further, not the
intention of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Depositor to the Trustee to secure a debt or other obligation of
the Depositor. However, in the event, that notwithstanding the intent of the
parties, the Mortgage Loans are held to be property of the Depositor, or if for
any reason this Agreement is held or deemed to create a security interest in the
Mortgage Loans, then, (a) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code
in effect in the applicable state; (b) the conveyance provided for in this
Agreement shall be deemed to be a grant by the Depositor to the Trustee of a
security interest in and to all of the Depositor's right, title, and interest,
whether now owned or hereafter acquired, in and to:
(I) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of
credit, certificated securities and uncertificated securities
consisting of, arising from or relating to any of the property
described in (A) through (D) below: (A) each Mortgage Loan,
including (a) the Mortgage Note and the related Mortgage and (b) its
Asset Balance and all Additional Balances and all collections in
respect thereof received on or after the Cut-Off Date, identified on
the Mortgage Loan Schedule as defined herein, including all Eligible
Substitute Mortgage Loans, (B) property that secured a Mortgage Loan
that is acquired by foreclosure or deed in lieu of foreclosure; (C)
the Purchase Agreement, (D) any hazard insurance policies in respect
of the Mortgage Loans; and (E) the Spread Account; and
(II) All proceeds of the collateral described in (I).
(c) the possession by the Trustee or its designee of the Mortgage Notes, the
Mortgages and such other goods, letters of credit, advices of credit,
instruments, money, documents, chattel paper or certificated securities shall be
deemed to be "possession by the secured party," or possession by a purchaser or
a person designated by him or her, for purposes of perfecting the security
interest pursuant to the Uniform Commercial Code (including, without limitation,
Sections 9-305, 8-313 or 8-321 thereof) as in force in the relevant
jurisdiction; and (d) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed to be notifications to, or acknowledgments,
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receipts or confirmations from, financial intermediaries, bailees or agents (as
applicable) of the Trustee or its designee for the purpose of perfecting such
security interest under applicable law. Subject to the provisions herein
permitting the Servicer (i) to retain possession of the Mortgage Files and (ii)
to commingle amounts collected with respect to the Mortgage Loans with other
general collections of the Servicer, the Depositor and the Trustee at the
direction of the Depositor to the extent consistent with this Agreement, shall
take such actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans and the proceeds
thereof, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of the Agreement. In connection herewith, the Trustee shall
have all of the rights and remedies of a secured party and creditor under the
Uniform Commercial Code as in force in the relevant jurisdiction.
Except as hereinafter provided, the Servicer shall be entitled to maintain
possession of all of the foregoing documents and instruments and shall not be
required to deliver any of them to the Trustee. If possession of any of such
documents or instruments is required by any Person (including the Trustee)
acting as successor servicer pursuant to Section 7.04 or 8.02 in order to carry
out the duties of Servicer hereunder, then such successor shall be entitled to
request delivery of such documents or instruments by and at the expense of the
Servicer and to retain such documents or instruments for servicing purposes;
provided that the Trustee or such servicers shall maintain such documents at
such offices as may be required by any regulatory body having jurisdiction over
such Mortgage Loans.
The Servicer's right to maintain possession of the documents enumerated
above shall continue so long as the long term unsecured debt of Bank One, N.A.,
is assigned ratings of at least "___" by ________ and "____" by _________. At
such time as the condition specified in the preceding sentence is not satisfied,
as promptly as practicable but in no event more than 90 days in the case of
clause (i) below and 60 days in the case of clause (ii) below following the
occurrence of such event (a "Delivery Event"), the Servicer shall, at its
expense, (i) either (x) record an Assignment of Mortgage in favor of the Trustee
(which may be a blanket assignment if permitted by applicable law) in the
appropriate real property or other records or (y) deliver to the Trustee the
assignment of such Mortgage in favor of the Trustee in form for recordation,
together with an opinion of Counsel addressed to the Trustee and the Credit
Enhancer to the effect that recording is not required to protect the Trustee's
right, title and interest in and to the related Mortgage Loan or, in case a
court should recharacterize the sale of the Mortgage Loans as a financing, to
perfect a first priority security interest in favor of the Trustee in the
related Mortgage Loan, which Opinion of Counsel also shall be reasonably
acceptable to each of the Rating Agencies (as evidenced in writing) and the
Credit Enhancer, and (ii) unless an opinion of Counsel, reasonably acceptable to
the Trustee, the Rating Agencies (as evidenced in writing) and the Credit
Enhancer, is delivered to the Trustee and the Credit Enhancer to the effect that
delivery of the Mortgage Files is not necessary to protect the Trustee's right,
title and interest in the related Mortgage Loans and that the lack of delivery
will not result in a reduction in the then current rating of the Investor
Certificates, without regard to the Policy, deliver the related Mortgage Files
to the Trustee or to a custodian located in the State of New York appointed by
the Trustee and acceptable to the Rating Agencies and the Credit Enhancer to be
held by the Custodian on behalf of the Trustee in trust, upon the terms herein
set forth, for the use and benefit of all present and future Certificateholders
and the Custodian on behalf of the Trustee
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shall retain possession thereof except to the extent the Servicer requires any
Mortgage Files for normal servicing as contemplated by Section 3.07. The Trustee
is hereby appointed as the attorney-in-fact of the Servicer with the power to
prepare, execute and record Assignments of Mortgages in the event that the
Servicer fails to do so on a timely basis as provided in this paragraph.
Within 90 days following delivery, if any, of the Mortgage Files to the
Trustee pursuant to the preceding paragraph, the Trustee shall review each such
Mortgage File to ascertain that all required documents set forth in this Section
2.01 have been executed and received, and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule and in so doing the
Trustee may rely on the purported due execution and genuineness of any signature
thereon. If within such 90-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Mortgage Loans identified in said Mortgage Loan Schedule
or, if in the course of its review, the Trustee determines that such Mortgage
File is otherwise defective in any material respect, the Trustee shall promptly
upon the conclusion of its review notify the Seller and the Credit Enhancer, and
the Seller shall have a period of 90 days after such notice within which to
correct or cure any such defect.
The Trustee shall have no responsibility for reviewing any Mortgage File
except as expressly provided in this Section 2.01. In reviewing any Mortgage
File pursuant to this Section, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of any
assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, whether any Person executing any document is authorized
to do so or whether any signature thereon is genuine, but shall only be required
to determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded.
(b) Within 90 days after an occurrence of a Document Preparation Trigger,
the Servicer shall prepare for each Mortgage Loan an endorsement in blank of the
original Mortgage Note, and an original Assignment of Mortgage in blank prepared
in recordable form.
Section 2.02. Acceptance by Trustee; Retransfer of Mortgage Loans. (a) The
Trustee hereby acknowledges its receipt of the Policy and the Mortgage Loans,
and declares that the Trustee holds and will hold such instrument, and to the
extent that any documents are delivered to it pursuant to Section 2.01, will
hold such documents, and all amounts received by it thereunder and hereunder, in
trust, upon the terms herein set forth, for the use and benefit of all present
and future Certificateholders and the Credit Enhancer. If the time to cure any
defect in respect of any Mortgage Loan of which the Trustee has notified the
Seller and the Depositor following the review pursuant to Section 2.01 has
expired or if at any time any loss is suffered by the Trustee on behalf of the
Certificateholders or the Credit Enhancer, in respect of any Mortgage Loan as a
result of (i) a defect in any document constituting a part of its Mortgage File
or (ii) an Assignment of Mortgage to the Trustee not having been recorded as
required by Section 2.01, then on the next succeeding Business Day upon the
deposit to the Collection Account of the Transfer Deposit Amount, if any, and
upon satisfaction of the applicable
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conditions described herein, all right, title and interest of the Trust in and
to such Mortgage Loan shall be deemed to be retransferred, reassigned and
otherwise reconveyed, without recourse, representation or warranty, to the
Seller on such Business Day and the Asset Balance of such Mortgage Loan shall be
deducted from the Pool Balance; provided, however, that interest accrued on the
Asset Balance of such Mortgage Loan to the end of the related Collection Period
shall be the property of the Trust. The Trustee shall determine if the reduction
of such Asset Balance from the Pool Balance in accordance with the preceding
sentence would cause the Transferor Principal Balance to be less than the
Minimum Transferor Interest ("Transfer Deficiency"), in which event the Trustee
shall deliver written notice of such deficiency to the Seller, and within five
Business Days after the Business Day of such retransfer the Seller shall either
(i) substitute an Eligible Substitute Mortgage Loan or (ii) deposit into the
Collection Account an amount (the "Transfer Deposit Amount") in immediately
available funds equal to the Transfer Deficiency or a combination of both (i)
and (ii) above. Such reduction or substitution and the actual payment of any
Transfer Deposit Amount, if any, shall be deemed to be payment in full for such
Mortgage Loan. Upon receipt of any Eligible Substitute Mortgage Loan or of
written notification signed by a Servicing Officer to the effect that the
Transfer Deposit Amount in respect of a Defective Mortgage Loan has been
deposited into the Collection Account or, if the Transferor Principal Balance is
not reduced below the Minimum Transferor Interest as a result of the deemed
retransfer of a Defective Mortgage Loan, then as promptly as practicable
following such deemed transfer, the Trustee shall execute such documents and
instruments of transfer presented by the Seller, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Seller to effect such transfer by the Trust of such Defective
Mortgage Loan pursuant to this Section. It is understood and agreed that the
obligation of the Seller to accept a transfer of a Defective Mortgage Loan and
to either convey an Eligible Substitute Mortgage Loan or to make a deposit of
any related Transfer Deposit Amount into the Collection Account shall constitute
the sole remedy respecting such defect available to Certificateholders, the
Trustee and the Credit Enhancer against the Seller.
The Servicer, promptly following the transfer of a Defective Mortgage Loan
from or the transfer of an Eligible Substitute Mortgage Loan to the Trust
pursuant to this Section, shall amend the Mortgage Loan Schedule and make
appropriate entries in its general account records to reflect such transfer. The
Servicer shall, following such retransfer, appropriately mark its records to
indicate that it is no longer servicing such Mortgage Loan on behalf of the
Trust. The Seller, promptly following such transfer, shall appropriately mark
its Electronic Ledger and make appropriate entries in its general account
records to reflect such retransfer.
Notwithstanding any other provision of this Section, a retransfer of a
Defective Mortgage Loan to the Seller pursuant to this Section that would cause
the Transferor Principal Balance to be less than the Minimum Transferor Interest
shall not occur if either the Seller fails to convey an Eligible Substitute
Mortgage Loan or to deposit into the Collection Account any related Transfer
Deposit Amount required by this Section with respect to the transfer of such
Defective Mortgage Loan.
(b) As to any Eligible Substitute Mortgage Loan or Loans, the Seller
shall, if a Delivery Event has occurred, deliver to the Trustee with respect to
such Eligible Substitute Mortgage Loan or Loans such documents and agreements as
are required to be held by the Trustee in accordance with Section 2.01. For any
Collection Period during which the Seller
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substitutes one or more Eligible Substitute Mortgage Loans, the Servicer shall
determine the Transfer Deposit Amount which amount shall be deposited by the
Seller in the Collection Account at the time of substitution. Any amounts
received in respect of the Eligible Substitute Mortgage Loan or Loans during the
Collection Period in which the circumstances giving rise to such substitution
occur shall not be a part of the Trust Fund and shall not be deposited by the
Servicer in the Collection Account. All amounts received by the Servicer during
the Collection Period in which the circumstances giving rise to such
substitution occur in respect of any Defective Mortgage Loan so removed by the
Trust Fund shall be deposited by the Servicer in the Collection Account. Upon
such substitution, the Eligible Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects, and the Seller shall be
deemed to have made with respect to such Eligible Substitute Mortgage Loan or
Loans, as of the date of substitution, the covenants, representations and
warranties set forth in Section 2.04. The procedures applied by the Seller in
selecting each Eligible Substitute Mortgage Loan shall not be materially adverse
to the interests of the Trustee, the Certificateholders and the Credit Enhancer.
Section 2.03. Representations and Warranties Regarding the Servicer. The
Servicer represents and warrants to the Trustee and the Credit Enhancer that as
of the Closing Date:
(i) The Servicer is duly organized and validly existing as a
national banking association and has the corporate power to own its assets
and to transact the business in which it is currently engaged. The
Servicer is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or any properties owned or leased by it requires
such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or financial
condition (or other) of the Servicer;
(ii) The Servicer has the corporate power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Seller enforceable in
accordance with its terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency moratorium, fraudulent conveyance,
reorganization and similar laws affecting the enforcement of the rights of
creditors of national banking associations, the deposits of which are
insured by the FDIC, and subject to general principles of equity, (whether
applied in a proceeding at law or in equity or of creditors' rights
generally);
(iii) The Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement (other than such consents, licenses,
approvals or authorizations from, or registrations or declarations with,
any governmental authority, bureau or agency that, individually or in the
aggregate, would not have a material adverse effect on the transactions
contemplated by this Agreement), except for such consent, license,
approval or authorization, or registration or declaration, as shall have
been obtained or filed, as the case may be, prior to the Closing Date;
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(iv) The execution, delivery and performance of this Agreement by
the Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the Servicer
or any provision of the articles of association or bylaws of the Servicer,
or constitute a material breach of any mortgage, indenture, contract or
other agreement to which the Service is a party or by which the Servicer
may be bound (other than violations of such laws, regulations, orders,
decrees, mortgages, contracts or other agreements that, individually or in
the aggregate, would not have a material adverse effect on the
transactions contemplated by this Agreement); and
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Servicer threatened, against the Servicer or any of its
properties or with respect to this Agreement or the Investor Certificates
or the Transferor Interest, which in the opinion of the Servicer has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
The representations and warranties set forth in this Section shall survive the
sale and assignment of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representations and warranties which materially and adversely
affects the interests of the Certificateholders or the Credit Enhancer, the
person discovering such breach shall give prompt written notice to the other
parties and to the Credit Enhancer. Within 90 days of its discovery or its
receipt of notice of breach, or, with the prior written consent of a Responsible
Officer of the Trustee, such longer period specified in such consent, the
Servicer shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Seller Regarding the
Mortgage Loans; Retransfer of Certain Mortgage Loans. (a) The Seller hereby
represents and warrants to the Trustee and the Credit Enhancer that as of the
Cut-Off Date, unless otherwise specifically set forth herein:
(i) As of the Closing Date, this Agreement constitutes a legal,
valid and binding obligation of the Seller, enforceable against the Seller
in accordance with its terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights generally and by the availability of equitable remedies;
(ii) As of the Closing Date with respect to the Mortgage Loans and
as of the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, either (A) the Purchase Agreement constitutes a valid
transfer and assignment to the Depositor of all right, title and interest
of the Seller in and to each Mortgage Loan (including its Cut-Off Date
Asset Balance), all monies due or to become due with respect thereto, and
all proceeds of such Cut-Off Date Asset Balances with respect to the
Mortgage Loans and such funds as are from time to time deposited in the
Collection Account (excluding any investment earnings thereon) and all
other property specified in the definition of "Asset" as being part of the
corpus of the Trust conveyed to the Trust by the Depositor, and (upon
payment for the Additional Balances), will constitute a valid transfer and
assignment to the Trustee of all right, title and interest of the Seller
in and to the Additional Balances, all monies due or to become due with
respect thereto, and all proceeds of such Additional
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Balances and all other property specified in the definition of "Asset"
relating to the Additional Balances or (B) the Purchase Agreement or this
Agreement, as appropriate, constitutes a grant of a security interest (as
defined in the UCC as in effect in Ohio) in such property to the Trustee
on behalf of the Trust. If this Agreement constitutes the grant of a
security interest to the Trust in such property, and if the Trustee
obtains and maintains possession of the Mortgage File for each Mortgage
Loan, the Trust shall have a first priority perfected security interest in
such property, subject to the effect of Section 9-306 of the UCC with
respect to collections on the Mortgage Loans that are deposited in the
Collection Account in accordance with the next to last paragraph of
Section 3.02(b); provided, however, that nothing in this clause (ii) shall
be construed to obligate the Servicer to deliver any Mortgage Files other
than as set forth in Section 2.01 hereof;
(iii) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan and as of the date any Additional Balance is created, the
information set forth in the Mortgage Loan Schedule for such Mortgage
Loans is true and correct in all material respects;
(iv) The applicable Cut-Off Date Asset Balance has not been assigned
or pledged, and the Seller is the sole owner and holder of such Cut-Off
Date Asset Balance free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority, under
all governmental and regulatory bodies having jurisdiction over the
ownership of the applicable Mortgage Loan, to sell, assign or transfer the
same pursuant to the Purchase Agreement;
(v) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage Note and the Mortgage with respect to
each Mortgage Loan have not been assigned or pledged, and the Seller is
the sole owner and holder of the Mortgage Loan free and clear of any and
all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full right
and authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the applicable Mortgage Loans, to sell,
assign or transfer the same pursuant to the Purchase Agreement;
(vi) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage is a valid and subsisting first,
second or more junior lien, as set forth on the Mortgage Loan Schedule
with respect to each related Mortgage Loan, on the property therein
described, and as of the applicable Cut-off Date the related Mortgaged
Property is free and clear of all encumbrances and liens having priority
over the first, second or more junior lien, as applicable, of such
Mortgage except for liens for (i) real estate taxes and special
assessments not yet delinquent; (ii) income taxes, (iii) any first or
similar mortgage loan secured by such Mortgaged Property and specified on
the Mortgage Loan Schedule; (iv) covenants, conditions and restrictions,
rights of way, easements and other matters of public record as of the date
of recording that are acceptable to mortgage lending institutions
generally; and (v) other matters to which like properties are
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commonly subject that do not materially interfere with the benefits of the
security intended to be provided by such Mortgage;
(vii) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no valid offset, defense or counterclaim of any
obligor under any Credit Line Agreement or Mortgage that has been asserted
or threatened;
(viii) To the best knowledge of the Seller, as of the Closing Date
with respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there are no delinquent
recordings or other tax or fee or assessment liens against any related
Mortgaged Property;
(ix) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no proceeding pending nor has the Seller received
notice of such proceeding being threatened for the total or partial
condemnation of the related Mortgaged Property, and to the best knowledge
of the Seller, such property is free of material damage;
(x) To the best knowledge of the Seller, as of the Closing Date with
respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there are no mechanics'
or similar liens or claims which have been filed for work, labor or
material affecting the related Mortgaged Property which are, or may be,
liens prior or equal to the lien of the related Mortgage, except liens
which are fully insured against by the title insurance policy;
(xi) No Minimum Monthly Payment is more than [89] days delinquent
(measured on a contractual basis); and with respect to the Mortgage Loans
no more than _____% (by Cut-Off Date Pool Balance) were [30-59] days
delinquent (measured on contractual basis) and no more than ____% (by
Cut-Off Date Pool Balance) were [60-89] days delinquent (measured on a
contractual basis);
(xii) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, for each Mortgage Loan, the related Mortgage File contains
each of the documents and instruments specified to be included therein;
(xiii) To the best knowledge of the Seller, the related Mortgage at
origination complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth in lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Mortgage Loan;
(xiv) To the best knowledge of the Seller, either a lender's title
insurance policy or binder was issued on the date of origination of the
Mortgage Loan and each such policy is valid and remains in full force and
effect, or a title search or guaranty of title customary in the relevant
jurisdiction was obtained with respect to a Mortgage Loan and to which no
title insurance policy or binder was issued;
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(xv) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, none of the Mortgaged Properties is a mobile home or a
manufactured housing unit that is not considered or classified as part of
the real estate under the laws of the jurisdiction in which it is located;
(xvi) No more than ____% of the Mortgage Loans, by aggregate
principal balance, are secured by Mortgaged Properties located in one
United States postal zip code;
(xvii) The Combined Loan-to-Value Ratio for each Mortgage Loan was
not in excess of 100%;
(xviii) No selection procedure reasonably believed by the Seller to
be adverse to the interests of the Certificateholders or the Credit
Enhancer was utilized in selecting the Mortgage Loans;
(xix) The Seller has not transferred the Mortgage Loans to the Trust
with any intent to hinder, delay or defraud any of its creditors;
(xx) The Minimum Monthly Payment with respect to any Mortgage Loan
is not less than the interest accrued at the applicable Loan Rate on the
daily Asset Balance during the interest period relating to the date on
which such Minimum Monthly Payment is due;
(xxi) Within 90 days of the Closing Date with respect to the
Mortgage Loans and, to the extent not already included in such filing with
respect to the Mortgage Loans, the applicable Transfer Date with respect
to any Eligible Substitute Mortgage Loan, the Seller will file UCC-1
financing statements with respect to the Mortgage Loans;
(xxii) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Credit Line Agreement and each Mortgage Loan is an
enforceable obligation of the related Mortgagor, except as the
enforceability thereof may be limited by the bankruptcy, insolvency or
similar laws affecting creditors' rights generally;
(xxiii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the Seller has not received a notice of default of any
senior mortgage loan related to a Mortgaged Property that has not been
cured by party other than the Servicer;
(xxiv) The definition of the applicable index in each Credit Line
Agreement relating to each Mortgage Loan does not differ materially from
the Index as set forth on Exhibit C;
(xxv) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis for the Mortgage Loans is
approximately ___ months and no Mortgage Loan will mature according to its
terms later than____ _____. Over the term
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of each Mortgage Loan, the Loan Rate may not exceed the related Loan Rate
Cap, if any. The Loan Rate Caps range between _____% and __% per annum.
The Margins range between ___% and _____%. The Loan Rates on such Mortgage
Loans range between ____% and _____% per annum and the weighted average
Loan Rate is approximately ____% per annum;
(xxvi) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Mortgaged Property consists of a single parcel of real
property with a one-to-four unit single family residence erected thereon,
an individual condominium unit, planned unit development unit or
townhouse;
(xxvii) No more than ____% (by Cut-Off Date Pool Balance) of the
Mortgage Loans are secured by real property improved by individual
condominium units, planned development units, townhouses or two-to-four
family residences erected thereon, and at least _____% (by Cut-Off Date
Pool Balance) of the Mortgage Loans are secured by real property with a
detached one-family residence erected thereon;
(xxviii) The Credit Limits on the Mortgage Loans range between
$______ and $_______ with an average of Credit Limit approximately
$________. No Mortgage Loan had a principal balance in excess of
approximately $__________ and the average principal balance of the
Mortgage Loans is equal to approximately $__________; and
(xxix) Approximately ________%, _______% and ______% of the Mortgage
Loans, by aggregate principal balance as of the Cut-Off Date for the
Mortgage Loans, are first, second or more junior liens, respectively.
With respect to the representations and warranties set forth in Section 2.04(a)
that are made to the best knowledge of the Seller, if it is discovered by the
Seller, the Depositor, the Servicer or a Responsible Officer of the Trustee that
the substance of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan then, notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation and warranty being inaccurate at the time the
representation or warranty was made, such inaccuracy shall be deemed a breach of
the applicable representation or warranty and subject the Seller to the
obligations set forth in Section 2.04(b).
(b) It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive delivery of the respective Mortgage
Files to the Trustee pursuant to Section 2.01 and the termination of the rights
and obligations of the Servicer pursuant to Section 7.04 or 8.02. Upon discovery
by the Seller, the Depositor, the Servicer, the Credit Enhancer or a Responsible
Officer of the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the interests of the Trust or
the Investor Certificateholders or the Credit Enhancer in the related Mortgage
Loan, the party discovering such breach shall give prompt written notice to the
other parties and the Credit Enhancer. Within 90 days of its discovery or its
receipt of notice of such breach, the Seller shall use all reasonable efforts to
cure such breach in all material respects or shall, not later than the Business
Day next preceding the Distribution Date in the month following the Collection
Period in which any such
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cure period expired (or such later date that is acceptable to the Trustee and
the Credit Enhancer as evidenced by their written consents), either (a) accept a
transfer of such Mortgage Loan from the Trust or (b) substitute an Eligible
Substitute Mortgage Loan in the same manner and subject to the same conditions
as set forth in Section 2.02; provided, however, that the cure for any breach of
a representation and warranty relating to the characteristics of the Mortgage
Loans in the aggregate shall be a repurchase of or substitution for only the
Mortgage Loans necessary to cause such characteristics to be in compliance with
the related representation and warranty. Upon accepting such transfer and making
any required deposit into the Collection Account or substitution of an Eligible
Substitute Mortgage Loan, as the case may be, the Seller shall be entitled to
receive an instrument of assignment or transfer from the Trustee to the same
extent as set forth in Section 2.02 with respect to the transfer of Mortgage
Loans under that Section.
It is understood and agreed that the obligation of the Seller to accept a
transfer of a Mortgage Loan as to which a breach has occurred and is continuing
and to make any required deposit in the Collection Account or to substitute an
Eligible Substitute Mortgage Loan, as the case may be, shall constitute the sole
remedy against the Seller respecting such breach available to Investor
Certificateholders, the Trustee on behalf of Investor Certificateholders and the
Credit Enhancer. Notwithstanding the foregoing, with regard to any breach of the
representation and warranty set forth in Section 2.04(a)(v), the sale and
assignment of the affected Mortgage Loans to the Trust shall be deemed void and
the Seller shall pay to the Trust the sum of the amount of the related Asset
Balances, plus unpaid accrued interest on each such Asset Balance at the
applicable Loan Rate to the date of payment.
Section 2.05. Covenants of the Depositor. The Depositor hereby covenants
that:
(a) Security Interests. Except for the transfer hereunder, the Depositor
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on any Mortgage Loan, whether now
existing or hereafter created, or any interest therein; the Depositor will
notify the Trustee of the existence of any Lien on any Mortgage Loan immediately
upon discovery thereof; and the Depositor will defend the right, title and
interest of the Trust in, to and under the Mortgage Loans, whether now existing
or hereafter created, against all claims of third parties claiming through or
under the Depositor; provided, however, that nothing in this Section 2.05(a)
shall prevent or be deemed to prohibit the Depositor from suffering to exist
upon any of the Mortgage Loans any Liens for municipal or other local taxes and
other governmental charges if such taxes or governmental charges shall not at
the time be due and payable or if the Depositor shall currently be contesting
the validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.
(b) Negative Pledge. The Depositor hereby agrees not to transfer, assign,
exchange, pledge, finance, hypothecate, grant a security interest in or
otherwise convey the Transferor Interest except in accordance with Sections 6.05
and 7.02.
(c) Additional Indebtedness. So long as the Investor Certificates are
outstanding the Depositor will not incur any debt other than debt that (i) is
non-recourse to the assets of the Depositor other than the Mortgage Loans
specifically pledged as security for such debt, or (ii) is subordinated in right
of payment to the rights of the Investor Certificateholders or (iii) is
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assigned a rating by each of the Rating Agencies that is the same as the then
current rating of the Investor Certificates.
(d) Downgrading. The Depositor will not engage in an activity which would
result in a downgrading of the Investor Certificates.
(e) Amendment to Certificate of Incorporation. The Depositor will not
amend its Certificate of Incorporation without prior written notice to the
Rating Agencies and the Credit Enhancer.
(f) Principal Place of Business. The Depositor's principal place of
business is in Ohio and it will not change its principal place of business
without prior written notice to the Rating Agencies.
Section 2.06. Retransfers of Mortgage Loans at Election of Transferor.
Subject to the conditions set forth below, the Transferor may, but shall not be
obligated to, require the retransfer of Mortgage Loans from the Trust to the
Transferor as of the close of business on a Distribution Date (the "Transfer
Date"). On the fifth Business Day (the "Transfer Notice Date") prior to the
Transfer Date designated in such notice, the Transferor shall give the Trustee
and the Servicer a notice of the proposed retransfer that contains a list of the
Mortgage Loans to be retransferred. Such retransfers of Mortgage Loans shall be
permitted upon satisfaction of the following conditions:
(i) No Rapid Amortization Event has occurred;
(ii) On the Transfer Notice Date the Transferor Principal Balance
(after giving effect to the removal from the Trust of the Mortgage Loans
proposed to be retransferred) is at least equal to the Minimum Transferor
Interest;
(iii) The transfer of any Mortgage Loans on any Transfer Date during
the Managed Amortization Period shall not, in the reasonable belief of the
Transferor, cause a Rapid Amortization Event to occur or an event which
with notice or lapse of time or both would constitute a Rapid Amortization
Event;
(iv) On or before the Transfer Date, the Transferor shall have
delivered to the Trustee a revised Mortgage Loan Schedule, reflecting the
proposed transfer and the Transfer Date, and the Servicer shall have
marked the Electronic Ledger to show that the Mortgages Loans transferred
to the Transferor are no longer owned by the Trust;
(v) The Transferor shall represent and warrant that no selection
procedures reasonably believed by the Transferor to be adverse to the
interests of the Investor Certificateholders or the Credit Enhancer were
utilized in the selection of the Mortgage Loans to be removed from the
Trust;
(vi) In connection with the first retransfer of Mortgage Loans
pursuant to this Section, each Rating Agency shall have received on or
prior to the related Transfer Notice Date notice from the Transferor of
such proposed retransfer of Mortgage Loans and, prior to the Transfer
Date, shall have notified the Trustee in writing that such
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retransfer of Mortgage Loans would not result in a reduction or withdrawal
of its then current rating of the Investor Certificates without regard to
the Policy;
(vii) The Transferor shall have delivered to the Trustee and the
Credit Enhancer an officer's Certificate certifying that the items set
forth in subparagraphs (i) through (vi), inclusive, have been performed or
are true and correct, as the case may be. The Trustee may conclusively
rely on such Officer's Certificate, shall have no duty to make inquiries
with regard to the matters set forth therein and shall incur no liability
in so relying.
Upon receiving the requisite information from the Transferor, the Servicer shall
perform in a timely manner those acts required of it, as specified above. Upon
satisfaction of the above conditions, on the Transfer Date the Trustee shall
deliver, or cause to be delivered, to the Transferor the Mortgage File for each
Mortgage Loan being so transferred, and the Trustee shall execute and deliver to
the Transferor such other documents prepared by the Transferor as shall be
reasonably necessary to transfer such Mortgage Loans to the Transferor. Any such
transfer of the Trust's right, title and interest in and to Mortgage Loans shall
be without recourse, representation or warranty by or of the Trustee or the
Trust to the Transferor.
Section 2.07. Execution and Authentication of Certificates. The Trustee,
on behalf of the Trust, has caused to be executed, authenticated and delivered
to or upon the order of the Depositor, in exchange for the corpus of the Trust,
concurrently with the sale, assignment and conveyance to the Trustee of the
corpus of the Trust, Investor Certificates in authorized denominations and the
Transferor Interest, together evidencing the ownership of the entire Trust.
Section 2.08. Tax Treatment. It is the intention of the Depositor, the
Transferor and the Investor Certificateholders that the Investor Certificates
will be indebtedness for federal, state and local income and franchise tax
purposes and for purposes of any other tax imposed on or measured by income. The
terms of the Agreement shall be interpreted to further the intent of the parties
hereto. The Transferor, the Depositor, the Trustee and each Investor
Certificateholder (or Certificate Owner) by acceptance of its Investor
Certificate (or, in the case of a Certificate Owner, by virtue of such
Certificate Owner's acquisition of a beneficial interest therein) agrees to
treat the Investor Certificates (or beneficial interest therein), for purposes
of federal, state and local income or franchise taxes and any other tax imposed
on or measured by income, as indebtedness of the Transferor secured by the
assets of the Trust and to report the transactions contemplated by this
Agreement on all applicable tax returns in a manner consistent with such
treatment. Each Investor Certificateholder agrees that it will cause any
Certificate Owner acquiring an interest in an Investor Certificate through it to
comply with this Agreement as to treatment of the Investor Certificates as
indebtedness for federal, state and local income and franchise tax purposes and
for purposes of any other tax imposed on or measured by income. The Trustee will
prepare and file all tax reports required hereunder.
Section 2.09. Representations and Warranties of the Depositor. The
Depositor represents and warrants to the Trustee on behalf of the
Certificateholders and the Credit Enhancer as follows:
(i) This Agreement constitutes a legal, valid and binding obligation
of the Depositor, enforceable against the Depositor in accordance with its
terms, except as
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enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a proceeding at law or in equity);
(ii) Immediately prior to the sale and assignment by the Depositor
to the Trustee of each Mortgage Loan, the Depositor was the sole
beneficial owner of each Mortgage Loan (insofar as such title was conveyed
to it by the Seller) subject to no prior lien, claim, participation
interest, mortgage, security interest, pledge, charge or other encumbrance
or other interest of any nature;
(iii) As of the Closing Date, the Depositor has transferred all
right, title and interest in the Mortgage Loans to the Trustee; and
(iv) The Depositor has not transferred the Mortgage Loans to the
Trustee with any intent to hinder, delay or defraud any of its creditors.
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ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Servicer.
(a) The Servicer shall service and administer the Mortgage Loans in a
manner consistent with the terms of this Agreement and with general industry
practice and shall have full power and authority, acting alone or through a
subservicer, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable, it being understood,
however, that the Servicer shall at all times remain responsible to the Trustee,
the Certificateholders, the Transferor and the Credit Enhancer for the
performance of its duties and obligations hereunder in accordance with the terms
hereof. Any amounts received by any subservicer in respect of a Mortgage Loan
shall be deemed to have been received by the Servicer whether or not actually
received by it. Without limiting the generality of the foregoing, the Servicer
shall continue, and is hereby authorized and empowered by the Trustee, to
execute and deliver, on behalf of itself, the Certificateholders and the
Trustee, or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the Mortgaged Properties. The Trustee shall, upon the written request of a
Servicing officer, furnish the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder. The Servicer in such capacity may
also consent to the placing of a lien senior to that of any Mortgage on the
related Mortgaged Property, provided that
(x) such Mortgage became a first lien mortgage after the
related Mortgage Loan was conveyed to the Trust and, immediately
following the placement of such senior lien, such Mortgage is a
second lien mortgage and the outstanding principal amount of the
mortgage loan secured by such senior lien is no greater than the
outstanding principal amount of the senior mortgage loan secured by
the Mortgaged Property as of the date the related Mortgage Loan was
originated; or
(y) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the Cut-Off Date and the new senior lien
secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount of the replacement first
mortgage loan immediately following such refinancing is not greater
than the outstanding principal amount of such existing first
mortgage loan at the date of origination of such Mortgage Loan;
provided further, that such senior mortgage does not secure a note
that provides for negative amortization.
The Servicer may also, without prior approval from the Rating Agencies or
the Credit Enhancer, increase the Credit Limits on Mortgage Loans provided that
(i) based upon a new appraisal, the Combined Loan-to-Value Ratios of the
Mortgage Loans after giving effect to such increase are no greater than __%,
(ii) such increases are consistent with the Servicer's
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underwriting policies and (iii) the aggregate Credit Limits of such Mortgage
Loans does not exceed __% of the aggregate of the Credit Limits as of the
Cut-Off Date.
Furthermore, the Servicer may, without prior approval from the Rating
Agencies and the Credit Enhancer solicit or receive requests from Mortgagors for
a reduction in Loan Rates; provided that the aggregate of such reductions shall
not cause the difference between the Cut-Off Date Weighted Average Gross Margin
and the Recalculated Weighted Average Gross Margin to exceed ____%.
Upon the prior written consent of each of the Rating Agencies, all of the
percentages in the immediately preceding two paragraphs may be modified.
In addition, the Servicer may agree to changes in the terms of a Mortgage
Loan at the request of the Mortgagor provided that such changes (i) do not
materially and adversely affect the interests of Certificateholders or the
Credit Enhancer and (ii) are consistent with prudent and customary business
practice as evidenced by a certificate signed by a Servicing Officer delivered
to the Trustee and the Credit Enhancer.
In addition to the foregoing, the Servicer may solicit Mortgagors to
change any other terms of the related Mortgage Loans, provided that such changes
(i) do not materially and adversely affect the interest of Certificateholders or
the Credit Enhancer and (ii) are consistent with prudent and customary business
practice as evidenced by a certificate signed by a Servicing officer delivered
to the Trustee and the Credit Enhancer. Nothing herein shall limit the right of
the Servicer to solicit Mortgagors with respect to new loans (including mortgage
loans) that are not Mortgage Loans.
The relationship of the Servicer (and of any successor to the Servicer as
servicer under this Agreement) to the Trustee under this Agreement is intended
by the parties to be that of an independent contractor and not that of a joint
venturer, partner or agent.
(b) In the event that the rights, duties and obligations of the Servicer
are terminated hereunder, any successor to the Servicer in its sole discretion
may, to the extent permitted by applicable law, terminate the existing
subservicer arrangements with any subservicer or assume the terminated
Servicer's rights under such subservicing arrangements which termination or
assumption will not violate the terms of such arrangements.
Section 3.02. Collection of Certain Mortgage Loan Payments.
(a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it follows with respect to mortgage loans in its
servicing portfolio comparable to the Mortgage Loans. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Servicer
may in its discretion (i) waive any late payment charge or any assumption fees
or other fees which may be collected in the ordinary course of servicing such
Mortgage Loan and (ii) arrange with a Mortgagor a schedule for the payment of
interest due and unpaid; provided that such arrangement is
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consistent with the Servicer's policies with respect to the mortgage loans it
owns and services; provided, further, that notwithstanding such arrangement such
Mortgage Loans will be included in the information regarding delinquent Mortgage
Loans set forth in the Servicing Certificate and monthly statement to
Certificateholders pursuant to Section 5.03.
(b) The Servicer shall establish and maintain a trust account (the
"Collection Account") titled "___________, as Trustee, in trust for the
registered holders of Banc One ABS Corporation Revolving Home Equity Loan
Asset-Backed Certificates, Series 199_-_ and [Credit Enhancer]." The Collection
Account shall be an Eligible Account. The Servicer shall on the Closing Date
deposit any amounts representing payments on, and any collections in respect of,
the Mortgage Loans received after the Cut-off Date and prior to the Closing
Date, and thereafter the Servicer, or the Seller, as the case may be, shall
deposit within two Business Days following receipt thereof the following
payments and collections received or made by it (without duplication):
(i) all collections on and in respect of the Mortgage Loans;
(ii) Net Liquidation Proceeds net of any related Foreclosure Profit;
(iii) Insurance Proceeds (including, for this purpose any amount
required to be credited by the Servicer pursuant to the last sentence of
Section 3.04 and excluding the portion thereof, if any, that has been
applied to the restoration or repair of the related Mortgaged Property or
released to the related Mortgagor in accordance with the normal servicing
procedures of the Servicer); and
(iv) any amounts required to be deposited therein pursuant to
Section 10.01;
provided, however, that with respect to each Collection Period, the Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Collection Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Servicer need not deposit in the Collection Account amounts representing
Foreclosure Profits, fees or late charge penalties payable by Mortgagors, or
amounts received by the Servicer for the accounts of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments, excess pay off
amounts and similar items. The Servicer shall remit all Foreclosure Profits to
the Seller.
Notwithstanding the forgoing, so long as the Servicer's short-term
obligations are rated at least "___" and "___" by __________ and ________
respectively, all amounts collected by the Servicer may be commingled with other
general collections of the Servicer and amounts collected on the Mortgage Loans
for each Collection Period shall be deposited in same-day funds into the
Collection Account no later than one Business Day prior to the related
Distribution Date.
The Trustee shall hold amounts deposited in the Collection Account as
trustee for the Certificateholders and for the Credit Enhancer. In addition, the
Servicer shall notify the Trustee an the Credit Enhancer in writing on each
Determination Date of the amount of payments and collections in the Collection
Account allocable to Interest Collections and Principal Collections
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for the related Distribution Date. Following such notification, the Servicer
shall be entitled to withdraw from the Collection Account and retain any amounts
that constitute income and gain realized from the investment of such payments
and collections.
All income and gain realized from any investment in Eligible Investments
of funds in the Collection Account shall be for the benefit of the
Certificateholders. The amount of any losses incurred in respect of the
principal amount of any such investments shall be deemed not to be on deposit in
the Collection Account.
Section 3.03. Withdrawals from the Collection Account. From time to time,
withdrawals may be made from the Collection Account by the Servicer for the
following purposes:
(i) To the Servicer as payment for its Servicing Fee pursuant to
Section 3.08;
(ii) To pay to the Servicer amounts on deposit in the Account that
are not to be included in the distributions and payments pursuant to
Section 5.01 to the extent provided by the second to the last and the last
paragraph of Section 3.02(b);
(iii) To make or to permit the Paying Agent to make distributions
and payments pursuant to Section 5.01; and
(iv) Prior to the Collection Period preceding the Rapid Amortization
Commencement Date, to pay to the Seller, the amount of any Additional
Balances as and when created during the related Collection Period,
provided, that the aggregate amount so paid to the Seller in respect of
Additional Balances at any time during any Collection Period shall not
exceed the amount of Principal Collections theretofore received for such
Collection Period.
If the Servicer deposits in the Collection Account any amount not required
to be deposited therein or any amount in respect of payments by Mortgagors made
by checks subsequently returned for insufficient funds or other reason for
non-payment it may at any time withdraw such amount from the Collection Account,
and any such amounts shall not be included in the amounts to be deposited in the
Collection Account pursuant to Section 3.02(b), any provision herein to the
contrary notwithstanding.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. The Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Servicer or the related subservicer as loss payee
thereunder providing extended coverage in an amount which is at least equal to
the lesser of (i) the replacement value of the improvements securing such
Mortgage Loan from time to time or (ii) the combined principal balance owing on
such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Servicer shall also maintain on property acquired upon foreclosure,
or by deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the replacement value from
time to time of the improvements which are a part of such property or (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan at the time of such foreclosure or deed in lieu of
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foreclosure plus accrued interest and the good-faith estimate of the Servicer of
related Liquidation Expenses to be incurred in connection therewith. Amounts
collected by the Servicer under any such policies shall be deposited in the
Collection Account to the extent called for by Section 3.02. In cases in which
any Mortgaged Property is located in a federally designated flood area, the
hazard insurance to be maintained for the related Mortgage Loan shall include
flood insurance. All such flood insurance shall be in such amounts as are
required under applicable guidelines of the Federal Flood Emergency Act. The
Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Servicer shall obtain and maintain a blanket insurance policy consistent
with prudent industry standards insuring against hazard losses on all of the
Mortgage Loans in an aggregate amount prudent under industry standards, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first sentence of this Section 3.04. Such blanket insurance policy may provide
for a deductible. In the event a loss on a Mortgage Property occurs which would
have been covered by the hazard insurance policy required by the first sentence
of this Section 3.04, the Servicer shall deposit into the Collection Account,
the amount not payable under the blanket policy because of such deductible.
Section 3.05. Assumption and Modification Agreements. In any case in which
a Mortgaged Property has been or is about to be conveyed by the Mortgagor, the
Servicer shall exercise its right to accelerate the maturity of such Mortgage
Loan consistent with the then current practice of the Servicer and without
regard to the inclusion of such Mortgage Loan in the Trust. If it elects not to
enforce its right to accelerate or if it is prevented from doing so by
applicable law, the Servicer (so long as such action conforms with the
underwriting standards generally acceptable in the industry at the time for new
origination) is authorized to take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Credit Line Agreement and, to the extent permitted by applicable law, the
Mortgagor remains liable thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 3.05 and by forwarding to the applicable Custodian, as agent
for the Trustee, the original copy of such assumption and modification
agreement. Any such assumption and modification agreement shall, for all
purposes, be considered a part of the related Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. No change in
the terms of the related Credit Line Agreement may be made by the Servicer in
connection with any such assumption to the extent that such change would not be
permitted to be made in respect of the original Credit Line Agreement pursuant
to the fourth paragraph of Section 3.01(a). Any fee collected by the Servicer
for entering into any such agreement will be retained by the Servicer as
additional servicing compensation.
Section 3.06. Realization Upon Defaulted Mortgage Loans. The Servicer
shall foreclose upon or otherwise comparably convert to ownership Mortgaged
Properties securing such of the Mortgage Loans as come into and continue in
default when, in the opinion of the Servicer based upon the practices and
procedures referred to in the following sentence, no satisfactory
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arrangements can be made for collection of delinquent payments pursuant to
Section 3.02; provided that if the Servicer has actual knowledge or reasonably
believes that any Mortgaged Property is affected by hazardous or toxic wastes or
substances and that the acquisition of such Mortgaged Property would not be
commercially reasonable, then the Servicer will not cause the Trust to acquire
title to such Mortgaged Property in a foreclosure or similar proceeding. In
connection with such foreclosure or other conversion, the Servicer shall follow
such practices (including, in the case of any default on a related senior
mortgage loan, the advancing of funds to correct such default) and procedures as
it shall deem necessary or advisable and as shall be normal and usual in its
general mortgage servicing activities. The foregoing is subject to the proviso
that the Servicer shall not be required to expend its own funds in connection
with any foreclosure or towards the correction of any default on a related
senior mortgage loan or restoration of any property unless it shall determine
that such expenditure will increase Net Liquidation Proceeds.
If title to any Mortgaged Property is acquired in foreclosure or by deed
in lieu of foreclosure, the deed or certificate of sale shall be issued to the
Trustee, or to its nominee on behalf of Certificateholders.
Section 3.07. Trustee to Cooperate. On or before each Distribution Date,
the Servicer will notify the Trustee of the payment in full of the Asset Balance
of any Mortgage Loan during the preceding Collection Period, which notification
shall be by a certification (which certification shall include a statement to
the effect that all amounts received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 3.02 have
been so deposited or credited) of a Servicing Officer. Upon any such payment in
full, the Servicer is authorized to execute, pursuant to the authorization
contained in Section 3.01, if the assignments of Mortgage have been recorded as
required hereunder, an instrument of satisfaction regarding the related
Mortgage, which instrument of satisfaction shall be recorded by the Servicer if
required by applicable law and be delivered to the Person entitled thereto. It
is understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or transfer shall be reimbursed from amounts
deposited in the Collection Account. If the Trustee is holding the Mortgage
Files, from time to time and as appropriate for the servicing or foreclosure of
any Mortgage Loan, or in connection with the payment in full of the Asset
Balance of any Mortgage Loan, the Trustee shall, upon request of the Servicer
and delivery to the Trustee of a Request for Release substantially in the form
attached hereto as Exhibit [_] signed by a Servicing officer, release the
related Mortgage File to the Servicer and the Trustee shall execute such
documents, in the forms provided by the Servicer, as shall be necessary to the
prosecution of any such proceedings or the taking of other servicing actions.
Such trust receipt shall obligate the Servicer to return the Mortgage File to
the Trustee when the need therefor by the Servicer no longer unless the Mortgage
Loan shall be liquidated, in which case, upon receipt of a certificate of a
Servicing Officer similar to that hereinabove specified, the trust receipt shall
be released by the Trustee or such Custodian to the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Servicer, execute an appropriate assignment in the
form provided to the Trustee by the Servicer to assign such Mortgage Loan for
the purpose of collection to the Servicer or to the related subservicer (any
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such assignment shall unambiguously indicate that the assignment is for the
purpose of collection only), and, upon such assignment, the Servicer will
thereupon bring all required actions in its own name and otherwise enforce the
terms of the Mortgage Loan and deposit the Net Liquidation Proceeds, exclusive
of Foreclosure Profits, received with respect thereto in the Collection Account.
In the event that all delinquent payments due under any such Mortgage Loan are
paid by the Mortgagor and any other defaults are cured, then the Servicer shall
promptly reassign such Mortgage Loan to the Trustee and return the related
Mortgage File to the place where it was being maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Servicer. The Servicer shall be entitled to receive the Servicing Fee pursuant
to Section 3.03 as compensation for its services in connection with servicing
the Mortgage Loans. Moreover, additional servicing compensation in the form of
late payment charges or other receipts not required to be deposited in the
Collection Account (other than Foreclosure Profits) shall be retained by the
Servicer. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all other fees
and expenses not expressly stated hereunder to be for the account of the
Certificateholders) and shall not be entitled to reimbursement therefor except
as specifically provided herein. Liquidation Expenses are reimbursable to the
Servicer solely from related Liquidation Proceeds.
Section 3.09. Annual Statement as to Compliance.
(a) The Servicer will deliver to the Trustee, the Credit Enhancer and the
Rating Agencies, on or before _____ ____of each year, beginning_________, 199_,
an Officer's Certificate stating that (i) a review of the activities of the
Servicer during the preceding fiscal year (or such shorter period as is
applicable in the case of the first report) and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
of its material obligations under this Agreement throughout such fiscal year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof.
(b) The Servicer shall deliver to the Trustee, the Credit Enhancer and
each of the Rating Agencies, promptly after having obtained knowledge thereof,
but in no event later than five Business Days thereafter, written notice by
means of an Officer's Certificate of any event which with the giving of notice
or the lapse of time or both, would become an Event of Servicing Termination.
Section 3.10. Annual Servicing Report. On or before ______ of each year,
beginning ______ __, 199_, the Servicer, at its expense, shall cause a firm of
nationally recognized independent public accountants (who may also render other
services to the Servicer) to furnish a report to the Trustee, the Credit
Enhancer and each Rating Agency to the effect that such firm has examined
certain documents and records relating to the servicing of mortgage loans during
the most recent fiscal year then ended under pooling and servicing agreements
(substantially similar to this Agreement, including this Agreement) that such
examination, was conducted substantially in compliance with the Uniform Single
Audit Program for Mortgage Bankers and that such examination has disclosed no
items of noncompliance with the provisions of this
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Agreement which, in the opinion of such firm, are material, except for such
items of noncompliance as shall be set forth in such report.
Section 3.11. RESERVED
Section 3.12. Access to Certain Documentation and Information Regarding
the Mortgage Loans.
(a) The Servicer shall provide to the Trustee, the Credit Enhancer, any
Investor Certificateholders that are federally insured savings and loan
associations, the Office of Thrift Supervision, successor to the Federal Home
Loan Bank Board, the FDIC and the supervisory agents and examiners of the office
of Thrift Supervision access to the documentation regarding the Mortgage Loans
required by applicable regulations of the office of Thrift Supervision and the
FDIC (acting as operator of the SAIF or the BIF), such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Servicer. Nothing in this Section 3.12 shall derogate from
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the
Servicer to provide access as provided in this Section 3.12 as a result of such
obligation shall not constitute a breach of this Section 3.12.
(b) The Servicer shall supply information in such form as the Trustee
shall reasonably request to the Trustee and the Paying Agent, on or before the
start of the Determination Date preceding the related Distribution Date, as is
required in the Trustee's reasonable judgment to enable the Paying Agent or the
Trustee, as the case may be, to make required distributions and to furnish the
required reports to Certificateholders and to make any claim under the Policy.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond together shall comply with the requirements from time to time
of the Federal National Mortgage Association for persons performing servicing
for mortgage loans purchased by such Association.
Section 3.14. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Seller, the Servicer, the Depositor and the
Transferor shall cooperate with the Trustee in the preparation of any such
report and shall provide to the Trustee in a timely manner all such information
or documentation as the Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section.
Section 3.15. Tax Returns. In accordance with Section 2.08 hereof, the
Trustee shall prepare and file any Federal, State or local income and franchise
tax return for the Trust as well as any other applicable return and apply for a
taxpayer identification number on behalf of the
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Trust. The Transferor shall treat the Mortgage Loans as its property for all
Federal, State or local tax purposes and shall report all income earned thereon
(including amounts payable as fees to the Servicer) as its income for income tax
purposes. In the event the Trust shall be required pursuant to an audit or
administrative proceeding or change in applicable regulations to file Federal,
State or local tax returns, the Trustee shall prepare and file or shall cause to
be prepared and filed any tax returns required to be filed by the Trust; the
Trustee shall promptly sign such returns and deliver such returns after
signature to the Servicer and such returns shall be filed by the Servicer. The
Trustee shall also prepare or shall cause to be prepared all tax information
required by law to be distributed to Investor Certificateholders. In no event
shall the Trustee or the Servicer be liable for any liabilities, costs or
expenses of the Trust, the Investor Certificateholders, the Holders of the
Transferor Interest or the Certificate Owners arising under any tax law,
including without limitation Federal, State or local income and franchise or
excise taxes or any other tax imposed on or measured by income (or any interest
or penalty with respect thereto or arising from a failure to comply therewith.
Section 3.16. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Servicer shall prepare and deliver all federal and state information reports
when and as required by all applicable state and federal income tax laws
including without limitation those under Sections 6050M, 6050J and 6050P of the
Code. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Servicer shall make reports of foreclosures and
abandonments of any mortgaged property for each year beginning in 199_, the
Servicer shall file reports relating to each instance occurring during the
previous calendar year in which the Servicer (i) on behalf of the Trustee
acquires an interest in any Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Mortgage Loan, or
(ii) knows or has reason to know that any Mortgaged Property has been abandoned.
The report from the Servicer shall be in form and substance sufficient to meet
the reporting requirements imposed by Section 6050J.
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate. Not later than each Determination
Date, the Servicer shall deliver (a) to the Trustee, the Statement to
Certificateholders required to be prepared pursuant to Section 5.03 and (b) to
the Trustee, the Seller, the Depositor, the Paying Agent, the Credit Enhancer
and each Rating Agency a Servicing Certificate (in written form or the form of
computer readable media or such other form as may be agreed to by the Trustee
and the Servicer), together with an Officer's Certificate to the effect that
such Servicing Certificate is true and correct in all material respects, stating
the related Collection Period, Distribution Date, the series number of the
Certificates, the date of this Agreement, and:
(i) the aggregate amount of collections received from the Mortgage
Loans on or prior to the Determination Date in respect of such Collection
Period;
(ii) the aggregate amount of (a) Interest Collections and (b)
Principal Collections for such Collection Period;
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(iii) the Investor Floating Allocation Percentage and the Investor
Fixed Allocation Percentage for such Collection Period;
(iv) the Investor Interest Collections and Investor Principal
Collections for such Collection Period;
(v) the Transferor Interest Collections and Transferor Principal
Collections for such Collection Period;
(vi) Investor Certificate Interest and the Investor Certificate Rate
for the related Interest Period;
(vii) the amount, if any, of such Investor Certificate Interest that
is not payable on account of insufficient Investor Interest Collections;
(viii) the portion of the Unpaid Investor Certificate Interest
Shortfall, if any, the amount of interest on such shortfall at the
Certificate Rate applicable from time to time (separately stated) to be
distributed on such Distribution Date;
(ix) the Unpaid Investor Certificate Interest Shortfall, if any, to
remain after the distribution on such Distribution Date;
(x) the Accelerated Principal Distribution Amount and the portion
thereof that will be distributed pursuant to Section 5.01(a)(vii);
(xi) the Scheduled Principal Collections Distribution Amount,
separately stating the components thereof;
(xii) the amount of any Transfer Deposit Amount paid by the Seller
or the Depositor pursuant to Section 2.02 or 2.04;
(xiii) any accrued and unpaid Servicing Fees for previous Collection
Periods and the Servicing Fee for such Collection Period;
(xiv) the Investor Loss Amount for such Collection Period;
(xv) the aggregate amount, if any, of Investor Loss Reduction
Amounts for previous Distribution Dates that have not been previously
reimbursed to Investor Certificateholders pursuant to 5.01(a)(v);
(xvi) the aggregate Asset Balance of the Mortgage Loans as of the
end of the preceding Collection Period and as of the end of the second
preceding Collection Period;
(xvii) the Pool Balance as of the end of the preceding Collection
Period and as of the end of the second preceding Collection Period;
(xviii) the Invested Amount as of the end of the preceding
Collection Period;
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(xix) the Investor Certificate Principal Balance and Pool Factor
after giving effect to the distribution on such Distribution Date and to
any reduction on account of the Investor Loss Amount;
(xx) the Transferor Principal Balance after giving effect to the
distribution on such Distribution Date;
(xxi) the aggregate amount of Additional Balances created during the
previous Collection Period;
(xxii) the number and aggregate Asset Balances of Mortgage Loans (x)
as to which the Minimum Monthly Payment is delinquent for 30-59 days,
60-89 days and 90 or more days, respectively and (y) that have become REO,
in each case as of the end of the preceding Collection Period;
(xxiii) whether a Rapid Amortization Event has occurred since the
prior Determination Date, specifying each such Rapid Amortization Event if
one has occurred; and
(xxiv) whether an Event of Servicing Termination has occurred since
the prior Determination Date, specifying each such Event of Servicing
Termination if one has occurred;
(xxv) the amount to be distributed to the Credit Enhancer pursuant
to Section 5.01(a)(vi) and Section 5.01(a)(viii)(ii), stated separately;
(xxvi) the amount to be distributed to the Spread Account pursuant to
Section 5.01(a)(viii)(i);
(xxvii) the Guaranteed Principal Distribution Amount for such
Distribution Date;
(xxviii) the Credit Enhancement Draw Amount, if any, for such
Distribution Date;
(xxix) the amount to be distributed to the Transferor pursuant to
Section 5.01(a)(x);
(xxx) the amount to be paid to the Servicer pursuant to Section
5.01(a)(ix);
(xxxi) the Maximum Rate for the related Collection Period and the
Weighted Average Net Loan Rate;
(xxxii) the total amount of funds on deposit in the Spread Account
and the applicable Spread Account Requirement;
(xxxiii) the Overcollateralization Amount after giving to the
distribution to be made on such Distribution Date;
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(xxxiv) the number and principal balances of any Mortgage Loans
retransferred to the Transferor pursuant to Section 2.06; and
(xxxv) the Recalculated Weighted Average Gross Margin.
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate may
be modified by the mutual agreement of the Servicer, the Trustee and the Credit
Enhancer. The Servicer shall give notice of any such change to the Rating
Agencies.
Section 4.02. Claims upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior to a
Distribution Date, the sum of the funds then on deposit in the Collection
Account for the related Collection Period which are payable to the Investor
Certificateholders pursuant to Sections 5.01(a) and (b) (after giving effect to
the distribution of the Trustee Fee and the Premium) and the amount on deposit
in the Spread Account is insufficient to pay the Guaranteed Distribution on such
Distribution Date, then the Trustee shall give notice to the Credit Enhancer by
telephone or telecopy of the amount equal to the Credit Enhancement Draw Amount.
Such notice of such sum shall be confirmed in writing in the form set forth as
Exhibit A to the Endorsement of the Policy, to the Credit Enhancer and the
Fiscal Agent, if any, at or before 10:00 a.m., New York City time, on the second
Business Day prior to such Distribution Date. Following receipt by the Credit
Enhancer of such notice in such form, the Credit Enhancer or the Fiscal Agent
will pay any amount payable under the Policy on the later to occur of (i) 12:00
noon, New York City time, on the Business Day following such receipt and (ii)
12:00 noon, New York City time, on the Distribution Date to which such
deficiency relates, as provided in the Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose trust account,
which account shall be an Eligible Account, for the benefit of Holders of the
Investor Certificates and the Credit Enhancer referred to herein as the "Policy
Payments Account" over which the Trustee shall have exclusive control and sole
right of withdrawal. The Trustee shall deposit any amount paid under the Policy
in the Policy Payments Account and distribute such amount only for purposes of
payment to Holders of the Investor Certificates of the Guaranteed Distribution
for which a claim was made and such amount may not be applied to satisfy any
costs, expenses or liabilities of the Servicer, the Trustee or the Trust Fund.
Amounts paid under the Policy shall be transferred to the Collection Account in
accordance with the next succeeding paragraph and disbursed by the Trustee to
Holders of Investor Certificates in accordance with Section 5.01. It shall not
be necessary for such payments to be made by checks or wire transfers separate
from the checks or wire transfers used to pay the Guaranteed Distribution with
other funds available to make such payment. However, the amount of any payment
of principal of or interest on the Investor Certificates to be paid from funds
transferred from the Policy Payments Account shall be noted as provided in
paragraph (c) below in the Certificate Register and in the statement to be
furnished to Holders of the Investor Certificates pursuant to Section 5.03.
Funds held in the Policy Payments Account shall not be invested.
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On any Distribution Date with respect to which a claim has been made under
the Policy, the amount of any funds received by the Trustee as a result of any
claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Collection Account and applied by the
Trustee, together with the other funds to be withdrawn from the Collection
Account pursuant to Section 5.01 directly to the payment in full of the
Guaranteed Distribution due on the Investor Certificates. Any funds received by
the Trustee shall be used solely for payment to the Holders of Investor
Certificates and may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Trustee or the Trust. Any funds remaining in
the Policy Payments Account on the first Business Day following a Distribution
Date shall be remitted to the Credit Enhancer, pursuant to the instructions of
the Credit Enhancer, by the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the amount of
interest and principal paid in respect of any Investor Certificate from moneys
received under the Policy. The Credit Enhancer shall have the right to inspect
such records at reasonable times during normal business hours upon one Business
Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Credit Enhancer and Fiscal Agent
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Investor Certificates. Each Investor Certificateholder, by its purchase of
Investor Certificates, the Servicer and the Trustee hereby agree that, the
Credit Enhancer (so long as no Credit Enhancer Default exists) may at any time
during the continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim, including, without limitation,
(i) the direction of any appeal of any order relating to such Preference Claim
and (ii) the posting of any surety, supersede as or performance bond pending any
such appeal. In addition and without limitation of the foregoing, the Credit
Enhancer shall be subrogated to the rights of the Servicer, the Trustee and each
Investor Certificateholder in the conduct of any such Preference Claim,
including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim.
Section 4.03. Spread Account.
(a) The Trustee shall establish and maintain a separate trust account (the
"Spread Account") titled "_______________, as Trustee, in trust for the
registered holders of Banc One ABS Corporation Revolving Home Equity Loan Asset
Backed Certificates, Series 199_-_ and [Credit Enhancer]." The Spread Account
shall be an Eligible Account. Amounts on deposit in the Spread Account will, at
the direction of the Transferor, be invested in either Eligible Investments
maturing no later than the day before the next Distribution Date or in the
commercial paper (maturing no later than the day before the next Distribution
Date) of Bank One, N.A. or any of its Affiliates, provided that such commercial
paper's or other short-term obligation's short-term rating is no lower than
"___" and "___"by ______ and _______, respectively, and the long-term unsecured
debt of Bank One, N.A. is rated at least "___" and
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"___" by ______ and ________, respectively, or such lower rating as is agreed to
by the Rating Agencies as evidenced by a letter from each such Rating Agency.
All income and gain realized from any investment of funds in the Spread
Account shall be for the benefit of the Transferor and shall be subject to its
withdrawal from time to time. The amount of any losses incurred in respect of
the principal amount of any such investments shall be deemed not to be on
deposit in the Spread Account.
(b) On each Determination Date the Trustee shall determine (i) the extent
to which Investor Interest Collections applied in the order specified in Section
5.01(a) are insufficient to make distributions as provided in clauses (iii) and
(iv) of Section 5.01(a) and (ii) the Guaranteed Principal Distribution Amount
for the related Distribution Date. On each Distribution Date the Trustee shall
withdraw from the Spread Account and deposit into the Collection Account the
lesser of the amount on deposit in the Spread Account and an amount equal to the
sum of the amounts, if any, determined in clauses (i) and (ii) of the preceding
sentence.
(c) Following the termination of the Trust pursuant to Section 10.01 or
11.02 hereof, the Trustee shall withdraw all amounts then on deposit in the
Spread Account and distribute such amounts first to any amounts due and owing to
the Credit Enhancer and then to the Transferor. If on any Distribution Date the
amount on deposit in the Spread Account exceeds the Spread Account Requirement,
the Trustee shall withdraw such excess and distribute it to the Transferor.
Section 4.04. Effect of Payments by the Credit Enhancer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on any of the Investor Certificates which is made with
monies received pursuant to the terms of the Policy shall not be considered
payment of such Investor Certificates from the Trust and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Investor Certificates within the meaning of Section 5.01. The Depositor,
the Servicer and the Trustee acknowledge, and each Holder by its acceptance of
an Investor Certificate agrees, that without the need for any further action on
the part of the Credit Enhancer, the Depositor, the Servicer, the Trustee or the
Certificate Registrar (a) to the extent the Credit Enhancer makes payments,
directly or indirectly, on account of principal of or interest on any Investor
Certificates to the Holders of such Certificates, the Credit Enhancer will be
fully subrogated to the rights of such Holders to receive such principal and
interest from the Trust and (b) the Credit Enhancer shall be paid such principal
and interest but only from the sources and in the manner provided herein for the
Payment of such principal and interest.
The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce the
Credit Enhancer's rights or interests under this Agreement without limiting the
rights or affecting the interests of the Holders as otherwise set forth herein.
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ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions.
(a) Distributions of Investor Interest Collections and Investment
Proceeds. Subject to Section 11.02(b), on each Distribution Date, the Trustee or
the Paying Agent, as the case may be, shall distribute out of the Collection
Account to the extent of Investor Interest Collections collected during the
related Collection Period and the amounts transferred from the Spread Account as
determined pursuant to Section 4.03(b), the following amounts and in the
following order of priority to the following Persons (based on the information
set forth in the Servicing Certificate):
(i) the Trustee Fee for such Distribution Date to the Trustee;
(ii) the premium pursuant to the Insurance Agreement to the Credit
Enhancer;
(iii) the Investor Certificate Interest for such Distribution Date
to the Investor Certificateholders and the Unpaid Investor Certificate
Interest Shortfall, if any, for such Distribution Date to the Investor
Certificateholders plus, to the extent legally permissible, interest
thereon at the Investor Certificate Rate plus _% per annum;
(iv) the Investor Loss Amount for such Collection Period to the
Investor Certificateholders as principal in reduction of the Investor
Certificate Principal Balance;
(v) to Investor Certificateholders as principal in reduction of the
Investor Certificate Principal Balance the aggregate amount of the
Investor Loss Reduction Amounts, in any, for previous Distribution Dates
that have not been previously reimbursed to Investor Certificateholders
pursuant to this clause (v);
(vi) to reimburse the Credit Enhancer for previously unreimbursed
Credit Enhancement Draw Amounts together with interest thereon at the
applicable rate set forth in the Insurance Agreement;
(vii) the Accelerated Principal Distribution Amount, if any, to the
Investor Certificateholders;
(viii) (i) to the Trustee to deposit to the Spread Account up to the
Spread Account Requirement and (ii) to the Credit Enhancer for any amounts
owed to the Credit Enhancer pursuant to the Insurance Agreement;
(ix) any amount required to be paid to the Servicer pursuant to
Section 7.03 which has not been previously paid to the Servicer; and
(x) any remaining amount to the Transferor.
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(b) Distribution of Principal Collections. Subject to Section 11.02(b) and
except on the Distribution Date in ______ on each Distribution Date, the Trustee
shall distribute out of the Collection Account to the Investor
Certificateholders the Principal Collections (including amounts transferred
thereto from the Spread Account pursuant to Section 4.03(b) in respect of the
amount determined pursuant to Section 4.03(b)(ii) up to the Scheduled Principal
Collections Distribution Amount but not in excess of the Investor Certificate
Principal Balance. On the Distribution Date in ______ the Trustee shall
distribute to Investor Certificateholders Principal Collections up to the
Investor Certificate Principal Balance.
(c) Reserved.
(d) Distribution of the Credit Enhancement Draw Amount. With respect to
any Distribution Date, to the extent that Investor Interest Collections and
amounts transferred from the Spread Account on the related Distribution Date in
respect of the amount determined pursuant to Section 4:03(b)(i) applied in the
order specified in Section 5.01(a) are insufficient to make distributions as
provided in clause (iii) of Section 5.01(a) above, the Trustee will make such
payments (the "Deficiency Amount") from the amount drawn under the Policy for
such Distribution Date pursuant to Section 4.02. For any Distribution Date as to
which there is a Guaranteed Principal Distribution Amount, the Trustee shall
distribute the Guaranteed Principal Distribution Amount to Certificateholders
from the amount drawn under the Policy for such Distribution Date pursuant to
Section 4.02.
The aggregate amount of principal distributed to the Investor
Certificateholders under this Agreement shall not exceed the Original Investor
Certificate Principal Balance.
(e) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Investor Certificateholder of record on
the related Record Date (other than as provided in Section 10.01 respecting the
final distribution) by check or money order mailed to such Investor
Certificateholder at the address appearing in the Certificate Register, or upon
written request by an Investor Certificateholder delivered to the Trustee at
least five Business Days prior to such Record Date, by wire transfer (but only
if such Certificateholder is the Depository or such Certificateholder owns of
record one or more Investor Certificates having principal denominations
aggregating at least $1,000,000), or by such other means of payment as such
Investor Certificateholder and the Trustee shall agree. Distributions among
Investor Certificateholders shall be made in proportion to the Percentage
Interests evidenced by the Investor Certificates held by such Investor
Certificateholders.
(f) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the Investor
Certificates. None of the Trustee, the Paying Agent, the Certificate Registrar,
the Depositor, the
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Credit Enhancer or the Servicer shall have any responsibility therefor except as
otherwise provided by applicable law.
(g) Distributions to Holders of Transferor Interest. On each Distribution
Date, the Trustee shall, based upon the information set forth in the Servicing
Certificate for such Distribution Date, distribute to the Transferor (i) the
Transferor Interest Collections for the related Collection Period and (ii) the
portion of Transferor Principal Collections for the related Collection Period in
excess of Additional Balances created during such Collection Period; provided
that collections allocable to the Transferor Interest will be distributed to the
Transferor only to the extent that such distribution will not reduce the amount
of the Transferor Principal Balance as of the related Distribution Date below
the Minimum Transferor Interest. Amounts not distributed to the Transferor
because of such limitations will be retained in the Collection Account until the
Transferor Principal Balance exceeds the Minimum Transferor Interest, at which
time such excess shall be released to the Transferor.
Section 5.02. Calculation of the Investor Certificate Rate. On the second
LIBOR Business Day immediately preceding each Distribution Date, the Trustee
shall determine LIBOR for the Interest Period commencing on such Distribution
Date and inform the Servicer (at the facsimile number given to the Trustee in
writing) of such rates. On each Determination Date, the Trustee shall determine
the applicable Investor Certificate Rate for the related Distribution Date.
Section 5.03. Statements to Certificateholders. Concurrently with each
distribution to Investor Certificateholders, the Trustee shall forward to each
Investor Certificateholder, the Servicer and each Rating Agency a statement
prepared by the Servicer pursuant to Section 4.01 with respect to such
distribution setting forth:
(i) the Investor Floating Allocation Percentage for the preceding
Collection Period;
(ii) the Investor Certificate Distribution Amount;
(iii) the amount of Investor Certificate Interest in such
distribution and the related Investor Certificate Rate;
(iv) the amount, if any, of any Unpaid Investor Certificate Interest
Shortfall in such distribution;
(v) the amount, if any, of the remaining Unpaid Investor Certificate
Interest Shortfall after giving effect to such distribution;
(vi) the amount, if any, of principal in such distribution,
separately stating the components thereof;
(vii) the amount, if any, of the reimbursement of previous Investor
Loss Reduction Amounts in such distribution;
(viii) the amount, if any, of the aggregate of unreimbursed Investor
Loss Reduction Amounts after giving effect to such distribution;
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(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount, the Investor Certificate Principal Balance
and the Pool Factor, each after giving effect to such distribution;
(xi) the Pool Balance as of the end of the preceding Collection
Period and the aggregate of the Asset Balances of the Mortgage Loans at
the close of business on the last day of the related Collection Period;
(xii) the Credit Enhancement Draw Amount, if any;
(xiii) the number and aggregate Asset Balances of Mortgage Loans as
to which the Minimum Monthly Payment is delinquent for 30-59 days, 60-89
days and 90 or more days, respectively, as of the end of the preceding
Collection Period;
(xiv) the book value (within the meaning of 12 C.F.R Section 571.13
or comparable provision) of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure;
(xv) the Investor Certificate Rate applicable to the distribution on
the following Distribution Date;
(xvi) the number and principal balances of any Mortgage Loans
retransferred to the Transferor pursuant to (a) Section 2.04 and (b)
Section 2.06.
In the case of information furnished pursuant to clauses (ii), (iii) in
respect of Investor Certificate Interest, (iv) and (viii) above, the amounts
shall be expressed as a dollar amount per Investor Certificate with a $1,000
denomination.
Within 60 days after the end of each calendar year, the Servicer shall
prepare or cause to be prepared and shall forward to the Trustee the information
set forth in clauses (iii) and (vi) above aggregated for such calendar year.
Such obligation of the Servicer shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
Servicer or a Paying Agent pursuant to any requirements of the Code.
The Trustee shall prepare or cause to be prepared (in a manner consistent
with the treatment of the Investor Certificates as indebtedness of the
Transferor, or as may be otherwise required by Section 3.15) Internal Revenue
Service Form 1099 (or any successor form) and any other tax forms required to be
filed or furnished to Certificateholders in respect of distributions by the
Trustee (or the Paying Agent) on the Investor Certificates and shall file and
distribute such forms as required by law.
Section 5.04. Rights of Certificateholders and Holder of the Transferor
Interest. The Investor Certificates shall represent fractional undivided
interests in the Trust, including the benefits of the Collection Account and the
right to receive Investor Interest Collections, Principal Collections and other
amounts at the times and in the amounts specified in this Agreement; the
Transferor Interest shall represent the remaining interest in the Trust.
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ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Investor Certificates shall be
substantially in the forms set forth in Exhibit A and shall, on original issue,
be executed, authenticated and delivered by the Trustee to or upon the order of
the Depositor concurrently with the sale and assignment to the Trustee of the
Trust. The Investor Certificates shall be initially evidenced by one or more
certificates representing the entire original Investor Certificate Principal
Balance and shall be held in minimum dollar denominations of $1,000 and integral
dollar multiples in excess thereof, except that one Investor Certificate may be
in a different denomination of less than $1,000 so that the sum of the
denominations of all outstanding Investor Certificates shall equal the Original
Investor Certificate Principal Balance. The sum of the denominations of all
outstanding Investor Certificates shall equal the Original Investor Certificate
Principal Balance. The Transferor Interest initially shall be an uncertificated
interest issued upon the order of the Depositor to the Trustee concurrently with
the sale and assignment to the Trustee of the Trust. The Transferor Interest may
be certificated pursuant to Section 6.02(a). The Transferor Interest shall
represent the entire interest in the assets of the Trust other than that
represented by the Investor Certificates and shall initially be issued to the
Seller.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer under its seal imprinted thereon.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Trustee substantially in the form provided for
herein, and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. Subject to Section 6.02(c), the Investor Certificates
shall be Book-Entry Certificates. The Transferor Interest shall not be
Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Investor
Certificates; Appointment of Registrar.
(a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Investor Certificates and the Transferor Interest and of
transfers and exchanges of Investor Certificates and the Transferor Interest as
herein provided. The Trustee shall initially serve as Certificate Registrar for
the purpose of registering Investor Certificates and the Transferor Interest and
transfers and exchanges of Investor Certificates and the Transferor Interest as
herein provided.
Upon surrender for registration of transfer of any Investor Certificate at
any office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing
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paragraph, the Trustee on behalf of the Trust shall execute, authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Investor Certificates of the same aggregate Percentage Interest. Upon
direction by the Transferor to the Trustee and the Certificate Registrar, the
Trustee shall issue the Transferor Interest in a certificated form substantially
in a form as set forth in Exhibit B. Upon notification by the Transferor to the
Certificate Registrar of a transfer of the Transferor Interest and subject to
Section 6.05, the Trustee on behalf of the Trust shall note on the Certificate
Register the transfer of the Transferor Interest.
At the option of the Investor Certificateholders, Investor Certificates
may be exchanged for other Investor Certificates in authorized denominations and
the same aggregate Percentage Interests, upon surrender of the Investor
Certificates to be exchanged at any such office or agency. Whenever any Investor
Certificates are so surrendered for exchange, the Trustee shall execute and
authenticate and deliver the Investor Certificates which the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of the Investor Certificates may not
be transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Investor Certificates; (iii)
ownership and transfers of registration of the Investor Certificates on the
books of the Depository shall be governed by applicable rules established by the
Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Trustee shall
deal with the Depository as representative of the Certificate Owners of the
Investor Certificates for purposes of exercising the rights of Holders under
this Agreement, and requests and directions for and votes of such representative
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to indirect participating firms and Persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the event of any conflict between the terms of
any such Letter of Representation and this Agreement the terms of this Agreement
shall control.
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(c) If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository, and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of an Event of Servicing
Termination, the Depository, at the direction of Certificate Owners representing
Percentage Interests aggregating not less than 51%. advises the Trustee in
writing that the continuation of a book-entry system through the Depository to
the exclusion of definitive, fully registered Investor Certificates (the
"Definitive Certificates") to Certificate Owners is no longer in the best
interests of the Certificate Owners. Upon surrender to the Certificate Registrar
of the Investor Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall execute and
authenticate the Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive, Certificates and the Trustee, the Certificate
Registrar, the Servicer and the Depositor shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
All Investor Certificates surrendered for registration of transfer or
exchange shall be cancelled by the Certificate Registrar and disposed of
pursuant to its standard procedures.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Trustee,
the Depositor and the Certificate Registrar such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Trustee or the Certificate Registrar that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver in exchange for or in lieu of any such mutilated, destroyed, last or
stolen Certificate, a new Certificate of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section 6.03, the Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 6.03, shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate or the Transferor Interest for registration of transfer, the
Servicer, the Depositor, the Trustee, the Certificate Registrar, any Paying
Agent and any agent of the Servicer, the Depositor, the Trustee,
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any Paying Agent or the Certificate Registrar may treat the Person, including a
Depository, in whose name any Certificate or the Transferor Interest is
registered as the owner of such Certificate or Transferor Interest for the
purpose of receiving distributions pursuant to Section 5.01 and for all other
purposes whatsoever, and none of the Servicer, the Depositor, the Trustee the
Certificate Registrar, any Paying Agent or any agent of any of them shall be
affected by notice to the contrary.
Section 6.05. Restrictions on Transfer of Transferor Interest.
(a) The Transferor Interest shall be assigned, transferred, exchanged,
pledged, financed, hypothecated or otherwise conveyed (collectively, for
purposes of this Section 6.05 and any other Section referring to the Transferor
Interest, "transferred" or a "transfer") only in accordance with this Section
6.05.
(b) No transfer of a Transferor Interest shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. Except for the initial issuance of the
Transferor Interest to the Transferor, the Trustee shall require (i) the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Trustee certifying to the Trustee the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or (ii) if the investment letter is not delivered, a written Opinion
of Counsel acceptable to and in form and substance satisfactory to the Trustee
and the Depositor that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from said Act or is
being made pursuant to said Act, which Opinion of Counsel shall not be an
expense of the Trustee or the Depositor. The Holder of a Transferor Interest
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Transferor against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws.
(c) The Transferor Interest and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Transferor Interest shall (A) be organized and
existing under the laws of the United States of America or any state or the
District of Columbia thereof, (B) expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee, the performance of every covenant
and obligation of the Transferor hereunder and (C) as part of its acquisition of
a Transferor Interest, acquire all rights of the Transferor or any transferee
under this Section 6.05(c) to amounts payable to such Transferor or such
transferee under Sections 5.01(a)(x) and 5.01(g); (ii) the Holder of the
Transferor Interest shall deliver to the Trustee an Officer's Certificate
stating that such transfer and such supplemental agreement comply with this
Section 6.05(c) and that all conditions precedent provided by this subsection
6.05(c) have been complied with and an Opinion of Counsel stating that all
conditions precedent provided by this subsection 6.05(c) have been complied
with, and the Trustee may conclusively rely on such Officer's Certificate, shall
have no duty to make inquiries with regard to the matters set forth therein and
shall incur no liability in so relying; (iii) the Holder of the Transferor
Interest shall deliver to the Trustee a letter from each Rating Agency
confirming that its rating of the Investor Certificates, after giving effect to
such transfer, will not be reduced or withdrawn without regard to the Policy;
(iv) the transferee of the Transferor Interest shall deliver to the Trustee an
Opinion of Counsel to the
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effect that (a) such transfer will not adversely affect the treatment of the
Investor Certificates after such transfer as debt for federal and applicable
state income tax purposes, (b) such transfer will not result in the Trust being
subject to tax at the entity level for federal or applicable state tax purposes,
(c) such transfer will not have any material adverse impact on the federal or
applicable state income taxation of an Investor Certificateholder or any
Certificate Owner and (d) such transfer will not result in the arrangement
created by this Agreement or any "portion" of the Trust, being treated as a
taxable mortgage pool as defined in Section 7701(i) of the Code; (v) all filings
and other actions necessary to continue the perfection of the interest of the
Trust in the Mortgage Loans and the other property conveyed hereunder shall have
been taken or made and (vi) the transferee shall have assumed the obligations of
the Transferor pursuant to Section 7.07 hereof. Notwithstanding the foregoing,
the requirement set forth in subclause (i)(A) of this Section 6.05(c) shall not
apply in the event the Trustee shall have received a letter from each Rating
Agency confirming that its rating of the Investor Certificates, after giving
effect to a proposed transfer to a Person that does not meet the requirement set
forth in subclause (i)(A), shall no be reduced or withdrawn. Notwithstanding the
foregoing, the requirements set forth in this paragraph (c) shall not apply to
the initial issuance of the Transferor Interest to the Transferor.
(d) Except for the initial issuance of the Transferor Interest to the
Transferor, no transfer of a Transferor Interest shall be made unless the
Trustee shall have received either (i) a representation letter from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA, nor a Person acting on
behalf of any such plan, which representation letter shall not be an expense of
the Trustee, (ii) if the purchaser is an insurance company, a representation
that the purchaser is an insurance company which is purchasing such Certificates
with funds contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60")) and that the purchase and holding of such Certificates are covered
under PTCE 95-60, or (iii) in the case of any Transferor Interest presented for
registration in the name of an employee benefit plan subject to ERISA, and
Section 4975 of the Code (or comparable provisions of any subsequent
enactment's), or a trustee of any such plan, an Opinion of Counsel to the effect
that the purchase or holding of such Certificate will not result in the assets
of the Trust being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the Trustee to
any obligation in addition to those undertaken in this Agreement, which Opinion
of Counsel shall not be an expense of the Trustee or the Depositor.
Section 6.06. Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Investor
Certificateholders from the Collection Account pursuant to Section 5.01 and
shall report the amounts of such distributions to the Trustee. The duties of the
Paying Agent may include the obligation (i) to withdraw funds from the
Collection Account pursuant to Section 3.03 and for the purpose of making the
distributions referred to above and (ii) to distribute statements and provide
information to Certificateholders as required hereunder. The Paying Agent
hereunder shall at all times be a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers and subject to
supervision or examination by federal or state authorities. The Paying Agent
shall
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initially be the Trustee. The Trustee may appoint a successor to act as Paying
Agent, which appointment shall be reasonably satisfactory to the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the Trustee)
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold all sums, if any,
held by it for payment to the Investor Certificateholders in trust for the
benefit of the Investor Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders and shall agree that it shall comply
with all requirements of the Code regarding the withholding of payments in
respect of Federal income taxes due from Certificate Owners and otherwise comply
with the provisions of this Agreement applicable to it.
Section 6.07. Acceptance of Obligations. The Transferor, by its acceptance
of the Transferor Interest, agrees to be bound by and to perform all the duties
of the Transferor set forth in this Agreement.
ARTICLE VII
The Servicer, the Seller and the Depositor
Section 7.01. Liability of the Seller, the Servicer and the Depositor. The
Seller and the Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by the Seller
or Servicer, as the case may be, herein. The Depositor shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Depositor.
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer or the Depositor; Assignment of Servicing to an Affiliate. Any
corporation into which the Servicer or the Depositor may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer or the Depositor shall be a party, or any
corporation succeeding to the business of the Servicer or the Depositor, shall
be the successor of the Servicer or the Depositor, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding. In addition, so long as Bank One, N.A. or an Affiliate thereof
is the Servicer, upon delivery of prior written notice to the Rating Agencies
and the Credit Enhancer, the Servicer may assign all of its rights and
obligations hereunder to any Eligible Affiliate Servicer provided that such
Eligible Affiliate Servicer agrees to be bound by the obligations of the
Servicer under the Insurance Agreement.
Section 7.03. Limitation on Liability of the Servicer and Others. Neither
the Servicer nor any of the directors or officers or employees or agents of the
Servicer shall be under any liability to the Trust or the Certificateholders for
any action taken or for refraining from the taking of any action by the Servicer
in good faith pursuant to this Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such Person
against any liability which would otherwise be imposed by reason of willful
misfeasance,
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bad faith or gross negligence in the performance of duties of the Servicer or by
reason of reckless disregard of obligations and duties of the Servicer
hereunder. The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Servicer and any director or officer or employee or agent of the Servicer
shall be indemnified by the Trust and held harmless against any loss, liability
or expense incurred in connection with any legal action relating to this
Agreement or the Certificates, other than any loss, liability or expense related
to any specific Mortgage Loan or Mortgage Loans (except as any such loss,
liability or expense shall be otherwise reimbursable pursuant to this Agreement)
and any loss, liability or expense incurred by reason of its willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of its reckless disregard of obligations and duties
hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to duties to
service the Mortgage Loans in accordance with this Agreement, and which in its
opinion may involve it in any expense or liability; provided, however, that the
Servicer may in its sole discretion undertake any such action which it may deem
necessary or desirable in respect of this Agreement, and the rights and duties
of the parties hereto and the interests of the Certificateholders hereunder. In
such event, the reasonable legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust and the Servicer shall only be entitled to be reimbursed therefor pursuant
to Section 5.01(a)(ix). The Servicer's right to indemnity or reimbursement
pursuant to this Section 7.03 shall survive any resignation or termination of
the Servicer pursuant to Section 7.04 or 8.01 with respect to any losses,
expenses, costs or liabilities arising prior to such resignation or termination
(or arising from events that occurred prior to such resignation or termination).
Section 7.04. Servicer Not to Resign. Subject to the provisions of Section
7.02, the Servicer shall not resign from the obligations and duties hereby
imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement, (ii) appointment of an Eligible Affiliate Servicer pursuant to
Section 7.02, or (iii) upon satisfaction of the following conditions: (a) the
Servicer has proposed a successor servicer to the Trustee in writing and such
proposed successor servicer is reasonably acceptable to the Trustee; (b) each
Rating Agency shall have delivered a letter to the Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Investor Certificates without
regard to the Policy; and (c) such proposed successor servicer is reasonably
acceptable to the Credit Enhancer, as evidenced by a letter to the Trustee;
provided, however, that no such resignation by the Servicer shall become
effective until the Trustee or successor servicer designated by the Servicer as
provided above shall have assumed the Servicer's responsibilities and
obligations hereunder or the Trustee shall have designated a successor servicer
in accordance with Section 8.02. An such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 8.01
and 8.02 as obligations that survive the resignation or termination of the
Servicer. Any such determination permitting the resignation of the Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee and the
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Credit Enhancer. The Servicer shall have no claim (whether by subrogation or
otherwise) or other action against any Certificateholders or the Credit Enhance
for any amounts paid by the Servicer pursuant to any provision of this
Agreement.
Section 7.05. Delegation of Duties. In the ordinary course of business,
the Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates, or any subservicer referred to in Section 3.01,
who agrees to conduct such duties in accordance with standards comparable to
those with which the Servicer complies pursuant to Section 3.01. Such delegation
shall not relieve the Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the meaning
of Section 7.04.
Section 7.06. Indemnification of the Trust by the Servicer. The Servicer
shall indemnify and hold harmless the Trust and the Trustee from and against any
loss, liability, expense, damage or injury suffered or sustained by reason of
the Servicer's activities or omissions in servicing or administering the
Mortgage Loans that are not in accordance with this Agreement, including, but
not limited to, any judgment, award, settlement, reasonable attorneys' fees and
other costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim. Any such indemnification shall not be
payable from the assets of the Trust. The provisions of this indemnity shall run
directly to and be enforceable by an injured party subject to the limitations
hereof. The provisions of this Section 7.06 shall survive termination of this
Agreement.
Section 7.07. Indemnification of the Trust by the Transferor.
Notwithstanding anything to the contrary contained herein, the Transferor (i)
agrees to be liable directly to the injured party without the party necessarily
making a prior claim against the Trust for the entire amount of any losses,
claims, damages, liabilities and expenses of the Trust (other than those
attributable to an Investor Certificateholder in the capacity as an investor in
the Investor Certificates as a result of defaults on the Mortgage Loans) to the
extent that the Transferor would be liable if the Trust were a partnership under
the Delaware Revised Uniform Limited Partnership Act in which the Transferor was
a general partner and (ii) shall indemnify and hold harmless the Trust and the
Trustee from and against any loss, liability, expense, damage, claim or injury
(other than those attributable to an Investor Certificateholder in the capacity
as an investor in the Investor Certificates as a result of defaults on the
Mortgage Loans) arising out of or based on this Agreement by reason of any acts,
omissions, or alleged acts or omissions arising out of activities of the Trust
or the Trustee, or the actions of the Servicer including, but not limited to,
amounts payable to the Servicer pursuant to Section 7.03, any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided that the Transferor shall not indemnify the Trustee (but shall
indemnify any other injured party) if such loss, liability, expense, damage or
injury is due to the Trustee's willful malfeasance, bad faith or gross
negligence or by reason of the Trustee's reckless disregard of its obligations
hereunder. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof.
Section 7.08. Limitation on Liability of the Transferor. None of the
directors or officers or employees or agents of the Transferor shall be under
any liability to the Trust, the Trustee or the Certificateholders, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement and
the
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issuance of the Certificates; provided, however, that this provision shall not
protect any such Person against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence in the
performance of the duties hereunder. Except as provided in Section 7.07, the
Transferor shall not be under any liability to the Trust, the Trustee or the
Certificateholders for any action taken or for refraining from the taking of any
action in its capacity as Transferor pursuant to this Agreement whether arising
from express or implied duties under this Agreement; provided, however, that
this provision shall not protect the Transferor against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties hereunder. The Transferor and any director or
officer or employee or agent of the Transferor may rely in good faith on an
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder.
ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination. If any one of the following
events ("Events of Servicing Termination") shall occur and be continuing:
(i) Any failure by the Servicer to deposit in the Collection Account
any deposit required to be made under the terms of this Agreement which
continues unremedied for a period of five Business Days after the date
upon which written notice of such failure shall have been given to the
Servicer by the Trustee or to the Servicer and the Trustee by the Credit
Enhancer or Holders of Investor Certificates evidencing Percentage
Interests aggregating not less than 25%; or
(ii) Failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer
set forth in the Certificates or in this Agreement, which failure
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, and
stating that such notice is a "Notice of Default" hereunder, shall have
been given to the Servicer by the Trustee or to the Servicer and the
Trustee by the Credit Enhancer or the Holders of Investor Certificates
evidencing Percentage Interests aggregating not less than 25%; or
(iii) The entry against the Servicer of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises for
the appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(iv) The consent by the Servicer to the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of
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debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to substantially all of its
property; or the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of its
obligations;
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Servicer, either the Trustee,
the Credit Enhancer or the Holders of Investor Certificates evidencing
Percentage Interests aggregating not less than 51%, by notice then given in
writing to the Servicer (and to the Trustee if given by the Credit Enhancer or
the Holders of Investor Certificates) may terminate all of the rights and
obligations of the Servicer as servicer under this Agreement. Any such notice to
the Servicer shall also be given to each Rating Agency and the Credit Enhancer.
On or after the receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Certificates or the Mortgage Loans or otherwise, shall pass to and be vested in
the Trustee pursuant to and under this Section 8.01; and, without limitation,
the Trustee is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, any and all documents and
other instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Mortgage Loan and related
documents, or otherwise. The Servicer agrees to cooperate with the Trustee in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Servicer and to be deposited by it in the Collection Account, or that have been
deposited by the Servicer in the Collection Account or thereafter received by
the Servicer with respect to the Mortgage Loans. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Mortgage Files to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 8.01 shall be paid
by the predecessor Servicer (or if the predecessor Servicer is the Trustee, the
initial Servicer) upon presentation of reasonable documentation of such costs
and expenses.
Notwithstanding the foregoing, a delay in or failure of performance under
Section 8.01(i) for a period of ten Business Days or under Section 8.01(ii) for
a period of 60 Business Days, shall not constitute an Event of Servicing
Termination if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Agreement
and the Servicer shall provide the Trustee, the Transferor, the Credit Enhancer
and the Investor Certificateholders with an Officers' Certificate giving prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Servicer shall immediately notify the
Trustee in writing of any Events of Servicing Termination.
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Section 8.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 8.01 or 7.04, the Trustee shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof. Notwithstanding the above, if the
Trustee becomes the Servicer hereunder, it shall have no responsibility or
obligation (i) of repurchase or substitution with respect to any Mortgage Loan,
(ii) with respect to any representation or warranty of the Servicer, and (iii)
for any act or omission of either a predecessor or successor Servicer other than
the Trustee. As compensation therefor, the Trustee shall be entitled to such
compensation as the Servicer would have been entitled to hereunder if no such
notice of termination had been given. In addition, the Trustee will be entitled
to compensation with respect to its expenses in connection with conversion of
certain information, documents and record keeping, as provided in Section
7.04(b). Notwithstanding the above, (i) if the Trustee is unwilling to act as
successor Servicer, or (ii) if the Trustee is legally unable so to act, the
Trustee may (in the situation described in clause (i)) or shall (in the
situation described in clause (ii)) appoint or petition a court of competent
jurisdiction to appoint, any established housing and home finance institution,
bank or other mortgage loan or home equity loan servicer having a net worth of
not less than $15,000,000 as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder; provided that any such successor Servicer shall be
acceptable to the Credit Enhancer, as evidenced by the Credit Enhancer's prior
written consent, which consent shall not be unreasonably withheld; and provided
further that the appointment of any such successor Servicer will not result in
the qualification, reduction or withdrawal of the ratings assigned to the
Certificates by the Rating Agencies without regard to the Policy. Pending
appointment of a successor to the Servicer hereunder, unless the Trustee is
prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
successor shall be entitled to receive compensation out of payments on Mortgage
Loans in an amount equal to the compensation which the Servicer would otherwise
have received pursuant to Section 3.08 (or such lesser compensation as the
Trustee and such successor shall agree). The Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
(b) Any successor, including the Trustee, to the Servicer as servicer
shall during the term of its service as servicer (i) continue to service and
administer the Mortgage Loans for the benefit of Certificateholders and the
Credit Enhancer and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and a fidelity bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.12. The
appointment of a successor Servicer shall not affect any liability of the
predecessor Servicer which may have arisen under this Agreement prior to its
termination as Servicer (including, without limitation, any deductible under an
insurance policy pursuant to Section 3.04), nor shall any successor Servicer be
liable for an acts or omissions of the predecessor Servicer or for any breach by
such Servicer of any of their representations or warranties contained herein.
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Section 8.03. Notification to Certificateholders. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VIII or
Section 7.04, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate
Register, the Credit Enhancer and each Rating Agency.
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence of
an Event of Servicing Termination and after the curing or waiver of all Events
of Servicing Termination which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement. If
an Event of Servicing Termination has occurred (which has not been cured or
waived) of which a Responsible Officer has knowledge, the Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs; provided,
however, that if the Trustee is acting as Servicer it shall use the same degree
of care and skill as is required of the Servicer under this Agreement.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Servicing Termination of
which a Responsible Officer of the Trustee has knowledge, and after the
curing or waiver of all such Events of Servicing Termination which may
have occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the Trustee
shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement, no implied
covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
or investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the consent or
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direction of the Credit Enhancer or in accordance with the direction of
the Holders of Investor Certificates evidencing Percentage Interests
aggregating not less than 51% relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement; and
(iv) the Trustee shall not be charged with knowledge of any failure
by the Servicer to comply with the obligations of the Servicer referred to
in clauses (i) and (ii) of Section 8.01 or of the occurrence of a Rapid
Amortization Event unless a Responsible Officer of the Trustee at the
Corporate Trust Office obtains actual knowledge of such failure or the
Trustee receives written notice of such failure from the Servicer, the
Credit Enhancer or the Holders of Investor Certificates evidencing
Percentage Interests aggregating not less than 51%.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. None
of the provisions contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of the Servicer under this Agreement, except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
this Agreement and in no event shall it be required to perform or accept
responsibility for the obligations of the Depositor, the Seller or the
Transferor.
Section 9.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be protected in
acting or refraining from acting upon, any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document reasonably believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such advice
or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at the
request, order or direction of any of the Certificateholders or the Credit
Enhancer, pursuant to the provisions of this Agreement, unless such
Certificateholders or the Credit Enhancer shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; the right of the
Trustee to perform any discretionary act enumerated in this Agreement
shall not be construed as a duty, and the Trustee shall not
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be answerable for other than its negligence or willful misconduct in the
performance of any such act; nothing contained herein shall, however,
relieve the Trustee of the obligations, upon the occurrence of an Event of
Servicing Termination (which has not been cured or waived) of which a
Responsible Officer has knowledge, to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care
and skill in their exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs, unless it is acting
as Servicer;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or owners conferred upon it
by this Agreement;
(v) prior to the occurrence of an Event of Servicing Termination and
after the curing or waiver of all Events of Servicing Termination which
may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or documents, unless
requested in writing to do so by Holders of Investor Certificates
evidencing Percentage Interests aggregating not less than 51%; provided,
however, that if the payment within a reasonable time to the Trustee of
the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to such proceeding.
The reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be reimbursed by the Servicer
upon demand. Nothing in this clause (v) shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no liability
and makes no representation as to any acts or omissions hereunder of the
Servicer until such time as the Trustee may be required to act as Servicer
pursuant to Section 8.02; and
(vii) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through an
Affiliate, agents or attorneys or a custodian.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans. The
recitals contained herein and in the Certificates (other than the authentication
of the Trustee on the Certificates) shall be taken as the statements of the
Depositor, and the Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representations as to the validity or sufficiency of
this Agreement or of the Certificates (other than the signature and
authentication of the Trustee on the Certificates) or of any Mortgage Loan or
Related Document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Depositor or the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Servicer. The Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any
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Mortgage or any Mortgage Loan, or the perfection and priority of any Mortgage or
the maintenance of any such perfection and priority, or for or with respect to
the sufficiency of the Trust or its ability to generate the payments to be
distributed to Certificateholders under this Agreement, including, without
limitation: the existence, condition and ownership of any Mortgaged Property;
the existence and enforceability of any hazard insurance thereon (other than if
the Trustee shall assume the duties of the Servicer pursuant to Section 8.02);
the validity of the assignment of any Mortgage Loan to the Trustee or of any
intervening assignment; the completeness of any Mortgage Loan; the performance
or enforcement of any Mortgage Loan (other than if the Trustee shall assume the
duties of the Servicer pursuant to Section 8.02); the compliance by the
Depositor, the Seller or the Servicer with any warranty or representation made
under this Agreement or in any related document or the accuracy of any such
warranty or representation prior to the Trustee's receipt of notice or other
discovery of any non-compliance therewith or any breach thereof; any investment
of monies by or at the direction of the Servicer or any loss resulting
therefrom, it being understood that the Trustee shall remain responsible for any
Trust property that it may hold in its individual capacity; the acts or
omissions of any of the Depositor, the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02), any subservicer or
any Mortgagor; any action of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02), or any subservicer
taken in the name of the Trustee; the failure of the Servicer or any subservicer
to act or perform any duties required of it as agent of the Trustee hereunder;
or any action by the Trustee taken at the instruction of the Servicer (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
8.02); provided, however, that the foregoing shall not relieve the Trustee of
its obligation to perform its duties under this Agreement. The Trustee shall
have no responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection of
any security interest or lien granted to it hereunder (unless the Trustee shall
have become the successor Servicer) or to prepare or file any Securities and
Exchange Commission filing for the Trust or to record this Agreement.
Section 9.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates with the
same rights as it would have if it were not Trustee and may transact any banking
and trust business with the Seller, the Servicer, the Credit Enhancer or the
Depositor.
Section 9.05. Servicer to Pay Trustee's Fees and Expenses; Servicer to
Indemnify. To the extent not otherwise paid pursuant to Section 5.01(a)(i), the
Servicer covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Servicer will pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all Persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith or which is the responsibility of Certificateholders
hereunder. The Servicer covenants and agrees to indemnify the Trustee from, and
hold it harmless against, any and all losses, liabilities, damages, claims or
expenses other than those resulting from the negligence or bad faith of the
Trustee. This section
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shall survive termination of this Agreement or the resignation or removal of any
Trustee hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation duly incorporated and validly existing under
the laws of the United States of America or any state thereof, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000, subject to supervision or examination by
federal or state authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 9.06,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. The principal office of the Trustee (other than the initial
Trustee) shall be in a state with respect to which an Opinion of Counsel has
been delivered to such Trustee at the time such Trustee is appointed Trustee to
the effect that the Trust will not be a taxable entity under the laws of such
state. In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 9.06, the Trustee shall resign immediately
in the manner and with the effect specified in Section 9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Transferor, the Depositor, the Servicer, the Credit
Enhancer and each Rating Agency. Upon receiving such notice of resignation, the
Transferor shall promptly appoint a successor Trustee (approved in writing by
the Credit Enhancer, so long as such approval is not unreasonably withheld) by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee (who shall deliver a copy to the Servicer)
and one copy to the successor Trustee; provided, however, that any such
successor Trustee shall be subject to the prior written approval of the
Transferor. If no successor Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.06 and shall fail to resign after written request
therefor by the Transferor or the Credit Enhancer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or if a
tax is imposed or threatens with respect to the Trust Fund by any state in which
the Trustee or the Trust Fund is located (which tax cannot be vacated by the
appointment of a co-Trustee or separate trustee pursuant to Section 9.10), then
the Transferor or the Credit Enhancer may remove the Trustee. If the Transferor
or the Credit Enhancer removes the Trustee under the authority of the
immediately preceding sentence, the Transferor shall promptly appoint a
successor Trustee (approved in writing by the Credit Enhancer, which approval
shall not be unreasonably withheld) by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor Trustee.
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The Holders of Investor Certificates evidencing Percentage Interests
aggregating over 50% of all Investor Certificates may at any time remove the
Trustee by written instrument or instruments delivered to the Servicer, the
Transferor and the Trustee; the Transferor shall thereupon use its best efforts
to appoint a successor trustee in accordance with this Section.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.07 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the
Transferor, the Depositor, the Servicer, the Credit Enhancer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Transferor, the Depositor, the Servicer and the
predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this Section
9.08 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 9.08, the successor Trustee shall mail notice of the succession of such
Trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register and to each Rating Agency. If the Servicer fails to
mail such notice within 30 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 9.09. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be eligible under the provisions of Section 9.06,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, any thing herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the
Transferor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments necessary to appoint one or more Persons approved by
the Credit Enhancer to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust, or any part thereof,
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and, subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Transferor and the Trustee may consider
necessary or desirable. Any such co-trustee or separate trustee shall be subject
to the written approval of the Servicer. If the Transferor shall not have joined
in such appointment within 15 days after the receipt by it of a request so to
do, or in the case an Event of Servicing Termination shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 9.06 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 9.08. The Servicer shall be responsible for the
fees of any co-trustee or separate trustee appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by law, be
appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder
or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee
except that following the occurrence of an Event of Servicing Termination,
the Trustee acting alone may accept the resignation or remove any separate
trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provide therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Transferor and the Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate
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trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of it estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
Section 9.11. Limitation of Liability. The Certificates are executed by
the Trustee, not in its individual capacity but solely as Trustee of the Trust,
in the exercise of the powers an authority conferred and vested in it by the
Trust Agreement. Each of the undertakings and agreements made on the part of the
Trustee in the Certificates is made and intended not as a personal undertaking
or agreement by the Trustee but is made and intended for the purpose of binding
only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in it own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certificateholders in respect of which such
judgment has been recovered.
Section 9.13. Suits for Enforcement. In case an Event of Servicing
Termination or other default by the Servicer, the Transferor, the Depositor or
the Seller hereunder shall occur an be continuing, the Trustee, in its
discretion, may proceed to protect and enforce its rights and the rights of the
Investor Certificateholders under this Agreement by a suit, action or proceeding
in equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy, as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee and the
Certificateholder.
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ARTICLE X
Termination
Section 10.01. Termination.
(a) The respective obligations and responsibilities of the Seller, the
Servicer, the Depositor, the Transferor and the Trustee created hereby (other
than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date and the obligation of the
Servicer to send certain notices as hereinafter set forth) shall terminate upon
the last action required to be taken by the Trustee on the final Distribution
Date pursuant to this Article X following the later of (A) payment in full of
all amounts owing to the Credit Enhancer and (B) the earliest of (i) the
transfer, under the conditions specified in Section 10.01(b), to the Transferor
of the Investor Certificateholders' interest in each Mortgage Loan and all
property acquired in respect of any Mortgage Loan remaining in the Trust for an
amount equal to the sum of (w) the Investor Certificate Principal Balance, (x)
accrued and unpaid Investor Certificate Interest through the day preceding the
final Distribution Date, and (y) interest accrued on any Unpaid Investor
Certificate Interest Shortfall, to the extent legally permissible, (ii) the day
following the Distribution Date on which the distribution made to Investor
Certificateholders has reduced the Investor Certificate Principal Balance to
zero, (iii) the final payment or other liquidation of the last Mortgage Loan
remaining in the Trust (including without limitation the disposition of the
Mortgage Loans pursuant to Section 10.02) or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan
(iv) the Distribution Date in____ _____; provided, however, that in no event
shall the trust created hereby continue beyond the expiration of 21 years from
the date of the last survivor descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date
hereof. Upon termination in accordance with clause (i) or (ii) of this Section
10.01, the Trustee shall execute such documents and instruments of transfer
presented by the Transferor, in each case without recourse, representation or
warranty, and take such other actions as the Transferor may reasonably request
to effect the transfer of the Mortgage Loans to the Transferor.
(b) The Transferor shall have the right to exercise the option to effect
the transfer to the Transferor of each Mortgage Loan pursuant to Section
10.01(a) above on any Distribution Date on or after the Distribution Date
immediately prior to which the Investor Certificate Principal Balance is less
than ____ percent (_%) of the Original Investor Certificate Principal Balance
and all amounts due and owing to the Credit Enhancer for unpaid premiums and
unreimbursed draws on the Policy, together with interest thereon as provided
under the Insurance Agreement, have been paid.
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Investor Certificateholders may surrender their Investor Certificates to the
Trustee for payment of the final distribution and cancellation, shall be given
promptly by the Trustee (upon receipt of written directions from the Transferor,
if the Transferor is exercising its right to transfer of the Mortgage Loans,
given not later than the first day of the month preceding the month of such
final distribution) to the Credit Enhancer and to the Servicer by letter to
Investor Certificateholders mailed not earlier than the
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15th day and not later than the 25th day of the month next preceding the month
of such final distribution specifying (i) the Distribution Date upon which final
distribution of the Investor Certificates will be made upon presentation and
surrender of Investor Certificates at the office or agency of the Trustee
therein designated, (ii) the amount of any such final distribution and (iii)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Investor Certificates at the office or agency of the Trustee therein specified.
In the event written directions are delivered by the Transferor to the Trustee
as described in the preceding sentence, the Transferor shall deposit in the
Collection Account on or before the Distribution Date for such final
distribution in immediately available funds an amount which, when added to the
funds on deposit in the Collection Account that are payable to the Investor
Certificateholders, will be equal to the retransfer amount for the Mortgage
Loans computed as above provided.
(d) Upon presentation and surrender of the Investor Certificates, the
Trustee shall cause to be distributed to the Holders of Investor Certificates on
the Distribution Date for such final distribution, in proportion to the
Percentage Interests of their respective Investor Certificates and to the extent
that funds are available for such purpose, an amount equal to (i) if such final
distribution is not being made pursuant to the transfer to the Transferor
pursuant to Section 10.01(a)(i), the amount required to be distributed to
Investor Certificateholders pursuant to Section 5.01 for such Distribution Date
and (ii) if such final distribution is being made pursuant to such retransfer,
the amount specified in Section 10.01(a)(i). The distribution on such final
Distribution Date pursuant to a retransfer pursuant to Section 10.01(a)(i) shall
be in lieu of the distribution otherwise required to be made on such
Distribution Date in respect of the Certificates. On the final Distribution Date
prior to having made the distributions called for above, the Trustee shall,
based upon the information set forth in the Servicing Certificate for such
Distribution Date, withdraw from the Collection Account and remit to the Credit
Enhancer the lesser of (x) the amount available for distribution on such final
Distribution Date, net of any portion thereof necessary to pay the amounts
described in clauses (d)(i) and (ii) above and (y) the unpaid amounts due and
owing to the Credit Enhancer for unpaid premiums and unreimbursed draws on the
Policy, together with interest thereon as provided under the Insurance
Agreement.
(e) In the event that all of the Investor Certificateholders shall not
surrender their Investor Certificates for final payment and cancellation on or
before such final Distribution Date, the Trustee shall on such date cause all
funds in the Collection Account not distributed in final distribution to
Investor Certificateholders to be withdrawn therefrom and credited to the
remaining Investor Certificateholders by depositing such funds in a separate
escrow account for the benefit of such Investor Certificateholders and the
Transferor (if the Transferor has exercised its right to transfer the Mortgage
Loans) or the Trustee (in any other case) shall give a second written notice to
the remaining Investor Certificateholders to surrender their Investor
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Investor
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders concerning surrender of their
Investor Certificates, and the cost thereof shall be aid out of the funds on
deposit in such escrow account.
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(f) Upon payment of all amounts owed under the Policy and cancellation of
the Investor Certificates, the Trustee shall provide the Credit Enhancer notice
of cancellation of the Investor Certificates and surrender the Policy to the
Credit Enhancer.
ARTICLE XI
Rapid Amortization Event
Section 11.01. Rapid Amortization Events. If any one of the following
events shall occur during the Managed Amortization Period:
(a) failure on the part of the Seller (i) to make any payment or deposit
required by the terms of this Agreement, on or before the date occurring three
Business Days after the date such payment or deposit is required to be made
herein, or (ii) duly to observe or perform in any material respect the covenants
of the Seller set forth in Section 2.04(a) or (iii) duly to observe or perform
in any material respect any other covenants or agreements of the Seller set
forth in this Agreement, which failure, in each case, materially and adversely
affects the interests of the Certificateholders or the Credit Enhancer and
which, in the case of clause (iii), continues unremedied and continues to affect
materially and adversely the interests of the Certificateholders for a period of
60 days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Seller by the Trustee, or to
the Seller and the Trustee by the Holders of Investor Certificates evidencing
Percentage Interests aggregating not less than 51%;
(b) any representation or warranty made by the Seller or the Depositor in
this Agreement shall prove to have been incorrect in any material respect when
made, as a result of which the interests of the Investor Certificateholders or
the Credit Enhancer are materially and adversely affected and which continues to
be incorrect in any material respect and continues to affect materially and
adversely the interests of the Certificateholders or the Credit Enhancer for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Seller or the
Depositor, as the case may be, by the Trustee, or to the Seller, the Depositor
and the Trustee by either the Credit Enhancer or the Holders of Investor
Certificates evidencing Percentage Interests aggregating not less than 51%;
provided, however, that a Rapid Amortization Event pursuant to this subparagraph
(b) shall not be deemed to have occurred hereunder if the Transferor has
accepted retransfer of the related Mortgage Loan or Mortgage Loans during such
period (or such longer period (not to exceed an additional 60 days) as the
Trustee may specify) in accordance with the provisions hereof;
(c) the Transferor or the Depositor shall go into liquidation, consent to
the appointment of a conservator or receiver or liquidator or similar person in
any insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Transferor or the Depositor, or of or
relating to all or substantially all of such Person's property, or a decree or
order of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Transferor or the Depositor and
such decree or order shall have remained in force undischarged or unstayed for
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a period of 30 days; or the Transferor or the Depositor shall admit in writing
its inability to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend payment of
its obligations;
(d) the Trust shall become subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended; or
(e) the aggregate of all draws under the Policy exceeds __% of the Cut-Off
Date Pool Balance;
then, in the case of any event described in subparagraph (a) or (b) after the
applicable grace period, if any, set forth in such subparagraphs, either the
Trustee, the Credit Enhancer or the Holders of Investor Certificates evidencing
Percentage Interests aggregating more than 51%, by notice given in writing to
the Transferor, the Depositor and the Servicer (and to the Trustee if given by
either the Credit Enhancer or the Investor Certificateholders) may declare that
an early amortization event (a "Rapid Amortization Event") has occurred as of
the date of such notice, and in the case of any event described in subparagraph
(c), (d) or (e), a Rapid Amortization Event shall occur without any notice or
other action on the part of the Trustee, the Credit Enhancer or the Investor
Certificateholders, immediately upon the occurrence of such event.
Section 11.02. Additional Rights Upon the Occurrence of Certain Events.
(a) If the Transferor goes into liquidation or consents to the appointment
of a conservator or receiver or liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Transferor or of or relating to all or
substantially all its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator or receiver or liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor and such decree shall have remained in force
undischarged or unstayed for a period of 30 days; or the Transferor shall admit
in writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations (such voluntary liquidation, appointment,
entering of such decree, admission, filing, making, suspension or violation or
other event described above, an "Insolvency Event"), the Transferor shall on the
day of such appointment, liquidation, entering of such decree, admission,
filing, making, suspension or inability, as the case may be (the "Appointment
Day"), promptly give notice to the Trustee, the Servicer and the Credit Enhancer
of such Insolvency Event. Within 15 days of the receipt by the Trustee of the
Transferor's notice of an Insolvency Event, the Trustee shall (i) publish a
notice in Authorized Newspapers that an Insolvency Event has occurred and that
the Trustee intends to direct the Servicer to sell, dispose of or otherwise
liquidate the Mortgage Loans in a commercially reasonable manner and (ii) send
written notice to the Investor Certificateholders describing the provisions of
this Section 11.02, which notice shall inform Investor Certificateholders that
unless more than 50% of all Investor Certificateholders advise the Trustee in
writing that they wish the Trustee to instruct the Servicer not to sell, dispose
of or otherwise
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liquidate the Mortgage Loans within 90 days from the day notice pursuant to
clause (i) above is first published (the "Publication Date"), the Trustee shall
instruct the Servicer to proceed to sell, dispose of, or otherwise liquidate the
Mortgage Loans in a commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of competitive bids, and
shall proceed to consummate the sale, liquidation or disposition of the Mortgage
Loans as provided above with the highest bidder for the Mortgage Loans. The
Transferor shall be permitted to bid for the Mortgage Loans. The Trustee may
obtain a prior determination from such conservator or receiver that the terms
and manner of any proposed sale, disposition or liquidation are commercially
reasonable. The provisions of Sections 11.01 and 11.02 shall not be deemed to be
mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the Mortgage
Loans pursuant to Section 11.02(a) above shall be treated as collections on the
Mortgage Loans received during the Rapid Amortization Period; provided, however,
that such proceeds will, based on amounts specified in writing by the Servicer
to the Trustee, first be paid to the Credit Enhancer to reimburse the Credit
Enhancer for previously unreimbursed Credit Enhancement Draw Amounts and other
amounts owing under the Insurance Agreement; and provided, further, that the
Certificateholders, Fixed Allocation Percentage of such remaining proceeds shall
be paid to Investor Certificateholders in the following amounts and order of
priority:
(i) all accrued and unpaid interest on the Investor Certificate
Principal Balance through the Interest Period immediately preceding the
Distribution Date on which such proceeds are distributed to the Investor
Certificateholders; and
(ii) an amount of principal up to the Investor Certificate Principal
Balance.
The Policy shall cover any shortfall in the event such proceeds are insufficient
to make the distributions to Investor Certificateholders pursuant to Section
11.02(b). On the day following the Distribution Date on which such proceeds are
distributed to the Investor Certificateholders the Trust shall terminate.
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment. This Agreement may be amended from time to time
by the Seller, the Servicer, the Transferor, the Depositor and the Trustee, in
each case without the consent of any of the Certificateholders, but only with
the consent of the Credit Enhancer (which consent shall not be unreasonably
withheld), (i) to cure any ambiguity, (ii) to correct any defective provisions
or to correct or supplement any provisions herein that may be inconsistent with
any other provisions herein, (iii) to add to the duties of the Transferor or the
Servicer, (iv) to add any other provisions with respect to matters or questions
arising under this Agreement or the Policy, as the case may be, which shall not
be inconsistent with the provisions of this Agreement, (v) to add or amend any
provisions of this Agreement as required by any Rating Agency or any other
nationally recognized statistical rating organization in order to maintain or
improve any rating of the Investor Certificates (it being understood that, after
obtaining the ratings in effect on the Closing Date, neither the Trustee, the
Seller, the Depositor nor the Servicer is obligated to
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obtain, maintain or improve any such rating), (vi) to add or amend any
provisions of this Agreement to correct or cure any defective provision or
ambiguity as a result of a transfer of the Transferor Interest pursuant to
Section 6.05, or (vii) to comply with any requirement imposed by the Code;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel, materially and adversely affect the interests of any Certificateholder
or the Credit Enhancer; and provided, further, that the amendment shall not be
deemed to adversely affect in any material respect the interests of the
Certificateholders and no opinion referred to in the preceding proviso shall be
required to be delivered if the Person requesting the amendment obtains a letter
from each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Investor Certificates without regard to the Policy. Notwithstanding the
foregoing, any amendment pursuant to clause (viii) above shall be permissible
only upon receipt of a letter from each Rating Agency stating that the amendment
would not result in the downgrading or withdrawal of the respective ratings then
assigned to the Investor Certificateholders without regard to the Policy.
This Agreement also may be amended from time to time by the Servicer, the
Seller, the Depositor and the Trustee, and the Servicer and the Credit Enhancer,
may from time to time consent to the amendment of the Policy with the consent of
the Holders of the Investor Certificates evidencing Percentage Interests
aggregating not less than 51%, and in the case of an amendment to this
Agreement, with the consent of the Credit Enhancer for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, payments on the
Certificates or distributions or payments under the Policy which are required to
be made on any Certificate without the consent of the Holder of such Certificate
or (ii) reduce the aforesaid percentage required to consent to any such
amendment, without the consent of the Holders of all Certificates then
outstanding or (iii) adversely effect in any material respect the interests of
the Credit Enhancer.
In the event that Treasury Regulations Sections 301-7701 et. seq. are
amended to permit the Trust to qualify as other than an association taxable as a
corporation (if the Trust is not otherwise treated as a security device) and the
Trustee receives an Officer's Certificate from the Servicer of such amendment,
the Trust will make an election and Sections 7.07 and 11.02(a) shall not be
given effect.
Notwithstanding the foregoing, the Agreement may not be amended unless, in
connection with such amendment, an Opinion of Counsel is furnished to the
Trustee that such amendment will not (i) adversely affect the status of the
Investor Certificates as debt; (ii) result in the Trust being taxable at the
entity level; or (iii) result in the Trust being classified as a taxable
mortgage pool (as defined in Section 7701(i) of the Code).
Following the execution and delivery of any such amendment hereto or to
the Policy to which the Credit Enhancer was require to consent, either the
Transferor, if the Transferor requested the amendment, or the Servicer, if the
Servicer requested the amendment, shall reimburse the Credit Enhancer for the
reasonable out-of-pocket costs and expenses incurred by the Credit Enhancer in
connection with such amendment.
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Prior to the execution of any such amendment, the party hereto requesting
any such amendment shall furnish written notification of the substance of such
amendment to each Rating Agency. In addition, promptly after the execution of
any such amendment made with the consent of the Investor Certificateholders, the
Trustee shall furnish written notification of the substance of such amendment to
each Investor Certificateholder and fully executed original counterparts of the
instruments effecting such amendment to the Credit Enhancer.
It shall not be necessary for the consent of Investor Certificateholders
under this Section 12.01 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
In executing any amendment permitted by this Section 12.01, the Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that such amendment is authorized or permitted hereby
and that all conditions precedent to the execution and delivery of such
amendment have been satisfied. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Trustee, but only upon direction of Investor Certificateholders accompanied by
an Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of Investor Certificateholders. The Investor
Certificateholders requesting such recordation shall bear all costs and expenses
of such recordation. The Trustee shall have no obligation to ascertain whether
such recordation so affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. Limitation on Rights of Certificateholders The death or
incapacity of any Investor Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Investor Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided in
Sections 8.01, 9.01, 9.02, 11.01 and 12.01) or in any manner otherwise control
the operation and management of the Trust, or the obligations of the parties
hereto, nor shall any thing herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any Investor
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Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Investor Certificates evidencing Percentage Interests aggregating not
less than 51% shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common benefit of
all Certificateholders. For the protection and enforcement of the provisions of
this Section 12.03, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
By accepting its Investor Certificate, each Investor Certificateholder
agrees that unless a Credit Enhancer Default exists, the Credit Enhancer shall
have the right to exercise all rights of the Investor Certificateholders under
this Agreement without an further consent of the Investor Certificateholders.
Section 12.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 12.05. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by certified mail, return receipt requested, to (a) in
the case of the Depositor, 100 East Broad Street, Columbus, OH 43271-0138,
Attention ___________, (b) in the case of the Servicer, Bank One, N.A., 100 East
Broad Street, Columbus, OH 43271-0138, (c) in the case of the Trustee, at the
Corporate Trust Office, (d) in the case of the Credit Enhancer,
_________________, Attention: _______________, [(e) in the case of Moody's,
Residential Loan Monitoring Group, 4th Floor, 99 Church Street, New York, New
York 10007, and (f) in the case of Standard & Poor's, 26 Broadway, New York, New
York 10004,] or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice. Any notice or other document required
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to be delivered or mailed by the Trustee to any Rating Agency shall be given on
a best efforts basis and only as a matter of courtesy and accommodation and the
Trustee shall have no liability for failure to deliver such notice or document
to any Rating Agency.
Section 12.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 12.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05, 7.02 and 7.04, this
Agreement may not be assigned by the Depositor or the Servicer without the prior
written consent of the Credit Enhancer and Holders of the Investor Certificates
evidencing Percentage Interests aggregating not less than 66%.
Section 12.08. Certificates Nonassesable and Fully Paid. The parties agree
that the Investor Certificateholders shall not be personally liable for
obligations of the Trust, that the beneficial ownership interests represented by
the Certificates shall be nonassessable for any losses or expenses of the Trust
or for any reason whatsoever, and that the Certificates upon execution,
authentication and delivery thereof by the Trustee pursuant to Section 2.08 or
6.02 are and shall be deemed full paid.
Section 12.09. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Certificateholders, the
Certificate Owners, the Credit Enhancer and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, no other
Person will have any right or obligation hereunder.
Section 12.10. Counterparts. This instrument may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 12.11. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 12.12. Insurance Agreement. The Trustee is authorized and directed
to execute and deliver the Insurance Agreement and to perform the obligations of
the Trustee thereunder.
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IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers all as of the day and year first above written.
BANC ONE ABS CORPORATION,
As Depositor
By
-----------------------------
Title:
BANK ONE, N.A.,
As Servicer
By
-----------------------------
Title:
_____________________________________,
As Trustee
By
-----------------------------
Title:
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State of NEW YORK )
) ss.:
County of NEW YORK )
On the __th day of ____, 199_ before me, a notary public in and for the
State of New York, personally appeared_________, known to me who, being by me
duly sworn, did depose and say that he resides at ________________; that he is
___________of Banc One ABS Corporation, a Delaware corporation, one of the
parties that executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
--------------------------------
Notary Public
[Notarial Seal]
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State of NEW YORK )
) ss.:
County of NEW YORK )
On the __th day of _____, 199_ before me, a notary public in and for the
State of New York, personally appeared__________, known to me who, being by me
duly sworn, did depose and say that he resides at Bank One, 100 East Broad
Street, Columbus, Ohio 43271-0138; that he is the __________ of Bank One, N.A.,
a national banking association, one of the parties that executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like order.
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